The Hritik comeback: How DSP’s 10-stock fund is betting on these heavyweights

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of the Nifty 50 index. Data compiled by DSP MF shows that the market capitalization share of the top ten Nifty companies is hovering around 20%, an all-time low compared to the overall universe of stocks. There are equal-weighted funds for the Nifty 50 and Nifty 100 indices in the industry, but none track the equal weight of the top 10 stocks in the Nifty index.

“Megacaps have been under-invested by retail investors lately as they favored high-yielding mid and small caps, but are expected to regain popularity," said Nirav Karkera, head of research at Fisdom. The new fund launch will be a more concentrated portfolio betting that the big will become bigger. Since 2006, the Nifty top 10 equal-weighted index has also beaten the Nifty 50, Nifty 100 and Nifty 500 indices.

“Large caps account for 70% of the market cap, more than 70% of profit & more than 75% of free cash flow but it’s getting 10% of the flows," said Sahil Kapoor, Market Strategist at DSP Mutual Fund. “This part of the market has underperformed, so the price froth is absent." Kapoor added that sectors such as banks, IT, and FMCG have been underperforming, and he believes that they are available at attractive valuations as they have underperformed relative to the broader markets. The top 10 companies mainly consist of stocks from the banking, IT, and FMCG sectors.

This year, the Nifty 500 rose 30%, whereas the Nifty IT, Nifty FMCG, and Nifty Bank increased 22%, 15%, and 7%, respectively. Retail investors in India have been welcoming factor-based passive funds to their portfolios. Mint had earlier reported that the asset under management of factor-based funds jumped 4x in the year through July from ₹7,050 crore to ₹26,363 crore.