This study examines the performance of Nifty 50 Exchange Traded Funds (ETFs) in comparison with the Nifty 50 benchmark index during the period 2020–2025. The Nifty 50, representing 50 large-cap companies listed on the National Stock Exchange of India, serves as a key indicator of India’s equity market performance. With the growing popularity of passive investing, ETFs tracking this index have become increasingly important for both retail and institutional investors.
The study adopts a quantitative research design using secondary data, including daily closing prices of selected ETFs—Nippon India ETF Nifty BeES, SBI ETF Nifty 50, and ICICI Prudential Nifty ETF—and the benchmark index. Key performance metrics such as Compound Annual Growth Rate (CAGR), tracking error, expense ratio, and liquidity indicators were analyzed to evaluate the efficiency of ETFs in replicating the benchmark.
The findings reveal that Nifty 50 ETFs closely tracked the benchmark, delivering returns in the range of 11.9% to 12.5% compared to the benchmark return of approximately 12.8%. However, minor underperformance was observed across all ETFs, primarily due to tracking error, expense ratios, and liquidity constraints. Among the selected ETFs, Nippon India ETF Nifty BeES demonstrated the highest efficiency, with the lowest tracking error (0.12%), minimal expense ratio (0.05%), and superior liquidity.
The study concludes that while ETFs are not perfect substitutes for the benchmark index, they provide a reliable and cost-effective means of achieving diversified market exposure. The results also highlight the importance of liquidity and cost considerations in ETF selection. These findings are particularly relevant for investors seeking passive investment strategies in India, as well as for policymakers aiming to enhance market efficiency and investor participation.
Overall, the research contributes to the understanding of ETF performance in emerging markets, especially during periods of significant market volatility such as the COVID-19 pandemic and subsequent recovery phase.