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Is First Trust India NIFTY 50 Equal Weight ETF (NFTY) a Strong ETF Right Now?

Zacks Equity Research
·4-min read

Making its debut on 02/14/2012, smart beta exchange traded fund First Trust India NIFTY 50 Equal Weight ETF (NFTY) provides investors broad exposure to the Asia-Pacific (Emerging) ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

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But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

NFTY is managed by First Trust Advisors, and this fund has amassed over $241.10 million, which makes it one of the average sized ETFs in the Asia-Pacific (Emerging) ETFs. Before fees and expenses, NFTY seeks to match the performance of the NIFTY 50 EQUAL WEIGHT INDEX .

The NIFTY 50 Equal Weight Index is an equally weighted index that tracks the performance of the 50 largest and most liquid Indian securities listed on the National Stock Exchange of India.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Operating expenses on an annual basis are 0.80% for NFTY, making it one of the more expensive products in the space.

It's 12-month trailing dividend yield comes in at 0.16%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Looking at individual holdings, Tata Motors Limited (TTMT.IS) accounts for about 2.50% of total assets, followed by Bharat Petroleum Corporation Limited (BPCL.IS) and Bajaj Auto Limited (BJAUT.IS).

NFTY's top 10 holdings account for about 23.61% of its total assets under management.

Performance and Risk

Year-to-date, the First Trust India NIFTY 50 Equal Weight ETF has added about 10.47% so far, and was up about 29.02% over the last 12 months (as of 06/26/2024). NFTY has traded between $46.65 and $60.51 in this past 52-week period.

NFTY has a beta of 0.78 and standard deviation of 18.51% for the trailing three-year period. With about 52 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust India NIFTY 50 Equal Weight ETF is a reasonable option for investors seeking to outperform the Asia-Pacific (Emerging) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

WisdomTree India Earnings ETF (EPI) tracks WisdomTree India Earnings Index and the iShares MSCI India ETF (INDA) tracks MSCI India Total Return Index. WisdomTree India Earnings ETF has $3.58 billion in assets, iShares MSCI India ETF has $11.11 billion. EPI has an expense ratio of 0.85% and INDA charges 0.65%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Asia-Pacific (Emerging) ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

First Trust India NIFTY 50 Equal Weight ETF (NFTY): ETF Research Reports

WisdomTree India Earnings ETF (EPI): ETF Research Reports

iShares MSCI India ETF (INDA): ETF Research Reports

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Zacks Investment Research