Last Updated on August 1, 2020 at 7:03 pm
This is a list of factor-based ETFs and index funds, also known as smart beta funds or strategic funds, available in India as of July 2020
What is a factor-based index? An index created by active stock selection using conditions such as low volatility, momentum, alpha, quality, value etc. and not market capitalization is called a factor index. Stocks in the index are weighted using these factors – for eg. lower volatility stock has a higher weight. So this combines active stock-picking – quantitative, rule-based -with passive investing (if an ETF or index fund follows this index)
To some extent, this eliminates the problems of concentration risk associated with market-capitalization-weighted indices: Do index fund returns depend upon just a few stocks (Concentration risk)? However please note that the initial eligible stock universe would be market capitalization based (not the weights, but the list of stocks). Also, concentration risk depends on the stock weight capping rule for each index (see examples below)
Note: This listing is provided only for information purposes and is not intended as a review or recommendation. The AUM of these funds are quite low and many of them are ETFs with low trading volumes. Therefore it is recommended not to invest in these at least for the time being.
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List of factor-based ETFs & index funds (smart beta) in India
| Scheme Name | AUM(Cr) June 2020 |
| DSP Equal Nifty 50 Fund | 99.9371 |
| Principal Nifty 100 Equal Weight Fund | 16.0920 |
| Sundaram Smart NIFTY 100 Eq Weight Fund | 20.9452 |
| ICICI Pru Nifty Low Vol 30 ETF | 111.0347 |
| Edelweiss ETF – Nifty 100 Quality 30 | 16.5371 |
| Kotak NV 20 ETF | 12.5074 |
| Nippon India ETF NV20 | 22.7120 |
| ICICI Pru NV20 ETF | 7.3439 |
| SBI quality 30 ETF | 19 |
| ICICI Pru – Nifty Alpha Low Volatility 30 ETF | Opens Aug 2020 |
Update: SBI quality 30 ETF has been added thanks to Ashwin Raja for pointing this out.
Description of underlying index funds
- DSP Equal Nifty 50 Fund: equal weight to Nifty 50 stocks. See: Nifty 50 Equal Weight Index vs Nifty 50: Does equal weight result in more returns?
- Principal Nifty 100 Equal Weight Fund and Sundaram Smart NIFTY 100 Eq Weight Fund: equal weight to Nifty 100 stocks. Related article: The NIFTY 100 Equal Weight Index As a Mutual Fund Benchmark
- ICICI Pru Nifty Low Vol 30 ETF 30 stocks with lowest volatility stocks from Nifty 100 over last one year. Related article: Picking Stocks With Low Volatility: A simple, but effective strategy? Stocks that have turnover less than any of Nifty 50 stocks are capped at 3%. Current weights can be seen in the latest factsheet of N100LV30
- Edelweiss ETF – Nifty 100 Quality 30: 30 stocks from NIFTY 100 and NIFTY Midcap 50 indices. Stocks with low price volatility in the last 365 days and higher profitability (ROE), lower leverage (debt to equity) and stabler earnings (EPS growth). Related article: How good are the top 10 stocks of NIFTY Quality Low-Volatility 30 Index? Weights are capped at 5% – this is a desirable feature. See the latest factsheet of N100Q30.
- Kotak NV 20 ETF, Nippon India ETF NV20, ICICI Pru NV20 ETF: Stocks with low PE (30% weight), low PB (20% weight), high div yield (10% weight) and high ROCE (40% weight) are shortlisted from the Nifty 50. The stocks with the top 20 “value rank” are chosen to be part of the index. Weights are capped at 15% (see NV 20 factsheet). This can cause concentration problems. This index is best avoided. Related article: Nifty 50 Value 20 (NV20) Index: Is this better than Nifty 50?.
- SBI quality 30 ETF This tracks the NIFTY 200 Quality 30 TRI. The criterion is the same as for the Edelweiss fund above but the stock universe is now Nifty 200.
Related articles:
- Are Nifty Smart Beta (strategic) Indices better than the Nifty Next 50?
- Low volatility stock investing: Does it work? Higher returns at lower risk?
- Momentum Stock Investing in India: Does it work?
Expense ratios of factor-based funds
| Fund | Expense Ratio(%) June 2020 |
| Edelweiss ETF – Nifty 100 Quality 30 | 0.28 |
| ICICI Pru Nifty Low Vol 30 ETF | 0.42 |
| ICICI Pru NV20 ETF | 0.15 |
| Nippon India ETF NV20 | 0.37 |
| Principal Nifty 100 Equal Weight Fund | 0.96 |
| Sundaram Smart NIFTY 100 Eq Weight Fund | 0.95 |
Last one-year tracking error of factor-based funds
Please note, tracking error of ETFs are with respect to NAV (industry standard). This is of no use to the investor. Tracking errors should be determined with respect to the price.
| Scheme Name | 29-Jul-2019 To 29-Jul-2020 Tracking Error |
| Principal Nifty 100 Equal Weight Fund(G) | 0.33 |
| Kotak NV 20 ETF | 0.53 |
| Nippon India ETF NV20 | 0.25 |
| ICICI Pru NV20 ETF | 0.53 |
| Edelweiss ETF – Nifty 100 Quality 30 | 0.11 |
| Sundaram Smart NIFTY 100 Eq Weight Fund-Reg(G) | 0.29 |
| ICICI Pru Nifty Low Vol 30 ETF | 0.13 |
| DSP Equal Nifty 50 Fund-Reg(G) | 0.40 |
Summary: factor-based funds are yet to catch on India because of AMC greed. They prefer to launch active “quant funds” based on AI and other assorted mumbo-jumbo instead of launching passive index funds. ETFs have no commissions and will not be marketed as much and suffer from liquidity risks. A multi-factor index fund should be interesting to track. Read more: How new stock investors can quickly start investing using NIFTY Multi-Factor Indices
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