Last Updated on September 5, 2022 at 4:15 pm
In this article, we tabulate index funds with the largest deviation in 1Y return (trailing as of 8th July 2022) from their corresponding indices.
Regular readers may be aware that the most practical way to evaluate how efficiently an index fund is tracking its index is not the tracking error” but the return difference. For example (in the context of this article), one-year fund return minus one-year index fund. Our monthly index fund tracking error screeners offer this data (1,2,3…9 years). The current listing is based on the July 2020 Index fund screener.
This return difference should be negative and small. If it is positive, then the index fund has beat the index. Meaning such a fund has a huge tracking error. This usually happens when the AUM is small. See, for example, These five index funds beat their indices! Why you should avoid them!
The 1Y return difference (1Y index fund return minus total returns benchmark return) is tabulated below for all 43 index funds with a 1Y history.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Funds with the largest return difference defined as one standard deviation more than the median are shown in bold.
| Scheme Name | 1Y Return Difference |
| Motilal Oswal Nifty Smallcap 250 Index Fund(G)-Direct Plan | -0.9144 |
| Taurus Nifty Index Fund(G)-Direct Plan | -0.8753 |
| Nippon India Nifty Smallcap 250 Index Fund(G)-Direct Plan | -0.8243 |
| L&T Nifty Next 50 Index Fund(G)-Direct Plan | -0.6533 |
| Sundaram Nifty 100 Equal Weight Fund(G)-Direct Plan | -0.6275 |
| Nippon India Nifty Midcap 150 Index Fund(G)-Direct Plan | -0.6111 |
| Aditya Birla SL Nifty 50 Equal Weight Index Fund(G)-Direct Plan | -0.5967 |
| UTI Nifty200 Momentum 30 Index Fund(G)-Direct Plan | -0.5782 |
| Motilal Oswal Nifty Next 50 Index Fund(G)-Direct Plan | -0.5384 |
| DSP Nifty 50 Equal Weight Index Fund(G)-Direct Plan | -0.5357 |
| Motilal Oswal Nifty 500 Index Fund(G)-Direct Plan | -0.4797 |
| Nippon India Nifty 50 Value 20 Index Fund(G)-Direct Plan | -0.4674 |
| Tata S&P BSE Sensex Index Fund(G)-Direct Plan | -0.4618 |
| ICICI Pru Nifty Next 50 Index Fund(G)-Direct Plan | -0.4279 |
| UTI Nifty Next 50 Index Fund(G)-Direct Plan | -0.4203 |
| Franklin India NSE Nifty 50 Index Fund(G)-Direct Plan | -0.4139 |
| Motilal Oswal Nifty Bank Index Fund(G)-Direct Plan | -0.3933 |
| Aditya Birla SL Nifty 50 Index Fund(G)-Direct Plan | -0.3672 |
| LIC MF S&P BSE Sensex Index Fund(G)-Direct Plan | -0.3559 |
| ICICI Pru S&P BSE Sensex Index Fund(G)-Direct Plan | -0.3327 |
| Motilal Oswal Nifty 50 Index Fund(G)-Direct Plan | -0.3293 |
| HDFC Index Fund-NIFTY 50 Plan(G)-Direct Plan | -0.3210 |
| SBI Nifty Next 50 Index Fund(G)-Direct Plan | -0.3204 |
| Aditya Birla SL Nifty Smallcap 50 Index Fund(G)-Direct Plan | -0.3176 |
| Kotak Nifty 50 Index Fund(G)-Direct Plan | -0.3142 |
| LIC MF Nifty 50 Index Fund(G)-Direct Plan | -0.3129 |
| Aditya Birla SL Nifty Midcap 150 Index Fund(G)-Direct Plan | -0.3050 |
| SBI Nifty Index Fund(G)-Direct Plan | -0.2882 |
| DSP NIFTY Next 50 Index Fund(G)-Direct Plan | -0.2835 |
| Nippon India Index Fund-Nifty 50 Plan(G)-Direct Plan | -0.2809 |
| ICICI Pru Nifty 50 Index Fund(G)-Direct Plan | -0.2713 |
| HDFC Index Fund-S&P BSE Sensex(G)-Direct Plan | -0.2687 |
| Motilal Oswal Nifty Midcap 150 Index Fund(G)-Direct Plan | -0.2675 |
| DSP NIFTY 50 Index Fund(G)-Direct Plan | -0.2617 |
| UTI Nifty 50 Index Fund(IDCW)-Direct Plan | -0.2613 |
| IDBI Nifty Index Fund(G)-Direct Plan | -0.2067 |
| IDBI Nifty Junior Index Fund(G)-Direct Plan | -0.2015 |
| Tata NIFTY 50 Index Fund(G)-Direct Plan | -0.1779 |
| Axis Nifty 100 Index Fund(G)-Direct Plan | -0.1701 |
| Nippon India Index Fund-S&P BSE Sensex Plan(G)-Direct Plan | -0.1664 |
| L&T Nifty 50 Index Fund(G)-Direct Plan | -0.1474 |
| Kotak Nifty Next 50 Index Fund(G)-Direct Plan | -0.1268 |
| IDFC Nifty 50 Index Fund(G)-Direct Plan | -0.1216 |
Among these, the following funds also qualify as funds with the largest 1Y return deviation if the base date for the trailing return calculation is changed from 8th July 2022 to 8th July 2021.
- Motilal Oswal Nifty Smallcap 250 Index Fund(G)-Direct Plan
- Motilal Oswal Nifty Next 50 Index Fund(G)-Direct Plan
- Sundaram Nifty 100 Equal Weight Fund(G)-Direct Plan
What should passive fund investors do?
Avoid funds beyond the Nifty 100 universe. Stick to Sensex, Nifty and Nifty Next 50 index funds.
Why? Because funds that track indices beyond the top 100 stocks by free-float market capitalization are (1) expensive – These index funds and ETFs are as expensive as active funds! (2) They have huge tracking errors (as defined by return differences) – Not all index funds are the same! Beyond top 100 stocks tracking errors are huge!.
Obviously, this leads to a huge loss to the investor over time. The underlying reason for this is market liquidity which can be measured via the impact cost. See Warning! Even large cap stocks are not liquid enough! Can you handle this?
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)