A passive Nifty investment strategy to beat market returns

Synopsis

If the gains successful Nifty are driven by a prime acceptable of stocks, investors could see the Top 10 Equal Weight index, portion investing successful the Nifty 50 Equal Weight scale is suitable successful times of a broad-based rally, says Anil Ghelani, caput of passive investments and products, DSP Mutual Fund.

Mumbai: A low-cost concern strategy that aims to payment from some constrictive and broad-based equity rallies could make market-beating returns. The plan, amended suited for seasoned investors, involves switching betwixt 2 Nifty scale funds -- Nifty Top 10 Equal Weight, and Nifty 50 Equal Weight -- depending connected marketplace conditions.

If the gains successful Nifty are driven by a prime acceptable of stocks, investors could see the Top 10 Equal Weight index, portion investing successful the Nifty 50 Equal Weight scale is suitable successful times of a broad-based rally, says Anil Ghelani, caput of passive investments and products, DSP Mutual Fund.

A survey by DSP Mutual money showed investors tin payment from phases of 'polarisation' and 'depolarisation' by adopting a elemental strategy of buying these scale funds.

When the rally is narrow, with the apical 10 stocks of the Nifty 50 starting to outperform the remaining 40 stocks of the Nifty 50, it is considered a polarised market. On the different hand, erstwhile the apical 10 stocks underperform the remaining 40 stocks successful the Nifty 50 Index, the signifier is termed depolarisation.

This strategy could marque higher returns than simply investing successful a azygous index. DSP's survey showed investors, who followed this strategy could person generated returns of 14.6% each twelvemonth implicit the February 2007 - April 2025 period. In comparison, investments successful the Nifty 50 Equal Weight Total Returns Index (TRI) unsocial would person returned 12.9% each year, portion it would beryllium 13.3% for the Nifty Top 10 Equal Weight TRI, and 12.2% for the Nifty 50 TRI.

"If you are capable to tactically clip the introduction into these funds, determination is scope for outperformance successful specified passive scale strategies," says Prateek Sinha, director, Deep MFD, a wealthiness absorption firm.

DSP said the Nifty has entered a polarisation signifier opening November 2024, wherever the apical 10 stocks are outperforming the broader markets, and investors would beryllium amended disconnected investing successful the Top 10 Equal Weight Index. During the 15 months betwixt September 2023 and November 2024, the marketplace had been successful a depolarisation phase.

For deciding their introduction points into each of these indices, investors indispensable way the ratio of the Top 10 Equal Weight Index to the 50 Equal Weight Index.

Whenever the ratio is supra its 12-month moving average, it means that the Nifty Top 10 Equal Weight Index has started to outperform. When this ratio moves beneath the 12-month moving average, investors could see the Nifty 50 Equal Weight Index.

Such investment strategies could enactment good for investors with blase systems.

"Family offices oregon affluent investors tin usage specified strategies, wherever they show the changing trends and are speedy to act," says S Shankar, certified fiscal planner astatine Credo Capital.

Sinha, of Deep MFD, said retail investors, particularly those who bash not way the marketplace regularly, mightiness find it hard to seizure specified changing trends.