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Research done by Cafemutual on index funds shows that seven large cap index funds have tracking error of less than 0.5.
Tracking error is the annualized difference between standard deviation of the fund and its benchmark.
SBI Nifty Index Fund and UTI Nifty 50 Index Fund have the lowest tracking error of 0.03 among large cap index funds.
In mid cap space, Aditya Birla Sun Life Nifty Midcap 150 Index Fund has the lowest tracking error of 0.13 followed by Nippon India Nifty Midcap 150 Index Fund and ICICI Prudential Nifty Midcap 150 Index Fund with 0.14 and 0.16, respectively.
Aditya Birla Sun Life Nifty Small Cap 50 Index Fund has a tracking error of 0.14, which is the lowest in the small cap category. Motilal Oswal Nifty Small cap 250 Index Fund and Nippon India Nifty Small cap 250 Index Fund, were next in the list with the tracking error of 0.17 and 0.21, respectively.
Among debt ETFs, Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund has the lowest tracking error of 1.15. ICICI Prudential Nifty PSU Bond Plus SDL Sep 2027 40:60 Index Fund and Edelweiss NIFTY PSU Bond Plus SDL Apr 2027 50:50 Index are the next two funds with low tracking error of 1.46 and 1.48, respectively.
If we see the international space, Motilal Oswal S&P 500 Index Fund has the lowest tracking error among others.
Nippon India Nifty 50 Value 20 Index Fund, UTI Nifty200 Momentum 30 Index Fund, Edelweiss Nifty 100 Quality 30 Index Fund have the lowest tracking error in factor-based index fund with tracking error of 0.13,0.18. and 0.29 respectively.
A lower tracking error signifies better performance.
Here are the top 3 funds across all categories with the lowest tracking error.
Large Cap
|
Ranking |
Scheme name |
Tracking |
|
1 (2 scheme)
|
SBI Nifty Index Fund and UTI Nifty 50 Index Fund |
0.03
|
|
2 (3 schemes)
|
HDFC Index Fund Nifty 50 Plan HDFC Index S&P BSE Sensex Fund Navi Nifty 50 Index Fund
|
0.04 |
|
3 (2 schemes)
|
DSP Nifty 50 Index Fund Motilal Oswal Nifty 50 Index Fund
|
0.05 |
Mid Cap
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Aditya Birla Sun Life Nifty Midcap 150 Index Fund |
0.13
|
|
2 (1 scheme)
|
Nippon India Nifty Midcap 150 Index Fund
|
0.14 |
|
3 (1 scheme)
|
ICICI Prudential Nifty Midcap 150 Index Fund |
0.16 |
Small Cap
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Aditya Birla Sun Life Nifty Small cap 50 Index Fund |
0.14 |
|
2 (1 scheme)
|
Motilal Oswal Nifty Small cap 250 Index Fund |
0.17 |
|
3 (1 scheme)
|
Nippon India Nifty Small cap 250 Index Fund |
0.21 |
Debt
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund |
1.15 |
|
2 (1 scheme)
|
ICICI Prudential Nifty PSU Bond Plus SDL Sep 2027 40:60 Index Fund |
1.46 |
|
3 (1 scheme)
|
Edelweiss NIFTY PSU Bond Plus SDL Apr 2027 50:50 Index |
1.48 |
International
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Motilal Oswal S&P 500 Index Fund |
0.13 |
|
2 (1 scheme)
|
Motilal Oswal MSCI EAFE Top 100 Select Index Fund |
18.36 |
|
3 (1 scheme)
|
ICICI Prudential NASDAQ 100 Index Fund |
47.50 |
Factor
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Nippon India Nifty 50 Value 20 Index Fund |
0.13
|
|
2 (1 scheme)
|
UTI Nifty200 Momentum 30 Index Fund |
0.18 |
|
3 (1 scheme)
|
Edelweiss Nifty 100 Quality 30 Index Fund |
0.29
|
Flexi
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Motilal Oswal Nifty 500 Index Fund |
0.06 |
Thematic
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Motilal Oswal Nifty Bank Index Fund |
0.12 |
Tracking difference is another interesting aspect that the research has captured.
With the tracking difference of -0.32, -0.34 and -.36, IDFC Nifty 50 Index Fund, Kotak Nifty Next 50 Index Fund and UTI Nifty 50 Index Fund are the top 3 index funds with lowest tracking difference in large cap space.
Tracking difference is simply the difference between returns generated by the fund and its benchmark.
In mid cap space, IDBI Nifty Junior Index has the lowest tracking difference of -0.62. Edelweiss NIFTY Large Mid Cap 250 Index Fund and Motilal Oswal Nifty Midcap 150 Index Fund have tracking difference of -1.15.
In debt space, Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund, ICICI Prudential Nifty PSU Bond Plus SDL Sep 2027 40:60 Index Fund have the lowest tracking difference of -0.29, -0.30 and -0.46.
Here are the top 3 funds across all categories with the lowest tracking difference.
Large Cap
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
IDFC Nifty 50 Index |
-0.32 |
|
2 (1 schemes)
|
Kotak Nifty Next 50 Index Fund |
-0.34 |
|
3 (1 schemes)
|
UTI Nifty 50 Index Fund |
-0.36
|
Mid Cap
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
IDBI Nifty Junior Index |
-0.62 |
|
2 (2 scheme)
|
Edelweiss NIFTY Large Mid Cap 250 Index Fund Motilal Oswal Nifty Midcap 150 Index Fund
|
-1.15 |
|
3 (2 scheme)
|
Aditya Birla Sun Life Nifty Midcap 150 Index Fund Nippon India Nifty Midcap 150 Index Fund
|
-1.19 |
Small Cap
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Aditya Birla Sun Life Nifty Small cap 50 Index Fund |
-1.03 |
|
2 (1 scheme)
|
ICICI Prudential Nifty Small cap 250 Index Fund |
-1.26 |
|
3 (1 scheme)
|
Motilal Oswal Nifty Small cap 250 Index Fund |
-1.50 |
Debt
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Edelweiss NIFTY PSU Bond Plus SDL Apr 2027 50:50 Index |
-0.29 |
|
2 (1 scheme)
|
Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund |
-0.30 |
|
3 (1 scheme)
|
ICICI Prudential Nifty PSU Bond Plus SDL Sep 2027 40:60 Index Fund |
-0.46 |
International
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Motilal Oswal S&P 500 Index Fund |
-1.41
|
|
2 (1 scheme)
|
Motilal Oswal MSCI EAFE Top 100 Select Index Fund |
-1.42 |
Factor
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
UTI Nifty200 Momentum 30 Index Fund |
-0.52
|
|
2 (1 scheme)
|
Edelweiss Nifty 100 Quality 30 Index Fund |
-0.88
|
|
3 (1 scheme)
|
Nippon India Nifty 50 Value 20 Index Fund |
-1.06
|
Flexi
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Motilal Oswal Nifty 500 Index Fund |
-1.15
|
Thematic
|
Ranking |
Scheme name |
Tracking |
|
1 (1 scheme)
|
Motilal Oswal Nifty Bank Index Fund |
-1.30
|
