Smart Beta Strategy

Smart Beta is an investment strategy that sits between passive index investing and active fund management — it tracks a rules-based index that is constructed using alternative weighting methodologies rather than simple market capitalisation. Instead of weighting stocks by their market cap (as the Nifty 50 does), Smart Beta strategies weight portfolios by factors such as value (low P/E or P/B), momentum (recent price performance), quality (high ROE, low debt), low volatility, or dividend yield. In India, SEBI-regulated Smart Beta ETFs and index funds are available across several factor strategies, giving investors a systematic, low-cost way to capture factor premiums that have historically delivered excess returns over market-cap-weighted benchmarks over long investment horizons.