Equal weight is the simplest way to turn a list of selected stocks into a portfolio. Divide 100 percent by the number of holdings and give each name that share. Twenty-five holdings means 4 percent each. Fifty holdings means 2 percent each.
The scheme makes one assumption and only one: you have no view on which of your selected names deserves more capital than the others. If your selection rule already did the work of picking good stocks, equal weight refuses to dilute that by handing most of the money to whichever of them happens to be the largest company.
NSE publishes an equal-weighted version of the Nifty 50. It holds the same 50 companies as the parent index but assigns each 2 percent at rebalance, so the largest constituent and the smallest constituent carry identical weight. The two indices hold identical stocks and produce different return series.
Weight per holding
| Holdings | Weight each | Capital per position on ₹10 lakh |
|---|---|---|
| 10 | 10.0% | ₹1,00,000 |
| 20 | 5.0% | ₹50,000 |
| 25 | 4.0% | ₹40,000 |
| 50 | 2.0% | ₹20,000 |
| 100 | 1.0% | ₹10,000 |
The formula is w_i = 1 / N, where N is the number of holdings. Between rebalances the actual weights drift with price. A name that rises 40 percent while the portfolio is flat now carries more than its target share, and the next rebalance trims it back.
What equal weight actually tilts you toward
Equal weight is not neutral. Relative to a cap-weighted portfolio drawn from the same list, it systematically overweights the smaller companies and underweights the mega-caps. If your universe is the Nifty 500, equal weighting pushes real money into the small end of that list, where impact cost and single-stock news risk are both higher.
It also costs turnover. Restoring equal weights means selling what went up and buying what went down at every rebalance. That is a mechanical contrarian trade, and it pays brokerage, STT and impact cost every time.
Risks to check in a backtest
Liquidity is the first thing to test. A 4 percent target weight in a stock that trades ₹2 crore a day is a different trade at ₹10 lakh of capital than at ₹10 crore. Check turnover next, since equal weighting at a weekly schedule can burn far more in costs than it recovers in rebalancing premium. Finally, confirm that the small-cap tilt is a bet you want, not an accident of the weighting choice.