Last Updated on August 22, 2022 at 11:15 pm
A look at the six available Nifty Next 50 (NN50) index funds to determine which has the lowest tracking error.
Only two NN50 index funds have a history greater than seven years – the ones from ICICI and IDBI. The next oldest fund is from UTI and is yet to complete two years at the time of writing! DSP launched its NN50 fund only in Feb 2019. Motilal came up with its fund in Dec 2019 and L&T launched its fund only in April 2020.
The oldest NN50 passive fund is Nippon India ETF Junior BeES which started in Feb 2003 (when NN50 was known as Nifty Jr). Visually, this is the only ETF that has minimal price-NAV fluctuations and a decent AUM of Rs. 1000 plus crores.
Computing ETF tracking error analysis requires price data and not NAV (as conveniently used by AMCs and rating portals). See: ICICI Nifty Next 50 Index Fund vs Reliance ETF Junior BeEs
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Other ETFs have also been reviewed before: What is the best way to invest in Nifty Next 50 Index? For typical retail investors, an index fund is better than an ETF as the burden of selling it to fellow unitholders is removed.
Let us start with the last one year returns (wrt June 5th 2020)
| Scheme Name | 1 Year |
| NIFTY NEXT 50 – TRI | -8.24 |
| ICICI Pru Nifty Next 50 Index Fund(G)-Direct Plan | -9.06 |
| IDBI Nifty Junior Index Fund(G)-Direct Plan | -8.58 |
| DSP NIFTY Next 50 Index Fund(G)-Direct Plan | -9.25 |
| UTI Nifty Next 50 Index Fund(G)-Direct Plan | -8.29 |
A simple way to measure index-tracking efficiently is to look at the return differences.
Tracking error = index (div incl) return minus index fund return
This must always be positive and as small as possible.
| Scheme Name | 1-year tracking error |
| ICICI Pru Nifty Next 50 Index Fund(G)-Direct Plan | 0.82 |
| IDBI Nifty Junior Index Fund(G)-Direct Plan | 0.33 |
| DSP NIFTY Next 50 Index Fund(G)-Direct Plan | 1.00 |
| UTI Nifty Next 50 Index Fund(G)-Direct Plan | 0.05 |
The clear loser is the DSP fund. It may be young but that is just too much difference. Sadly the ICICI fund is a close second for this duration. It would be premature to declare the UTI fund as the winner due to its age but that is good going!
The tracking error for durations below the last one year is tabulated below. Good going by UTI. Cannot say the same for funds from DSP and ICIC.
| Scheme Name | 1 Month | 3 Months | 6 Months | 9 Months |
| ICICI Pru Nifty Next 50 Index Fund(G)-Direct Plan | 0.026 | 0.437 | 0.528 | 0.704 |
| IDBI Nifty Junior Index Fund(G)-Direct Plan | 0.213 | -0.013 | 0.086 | 0.298 |
| DSP NIFTY Next 50 Index Fund(G)-Direct Plan | 0.120 | 0.702 | 0.691 | 0.726 |
| UTI Nifty Next 50 Index Fund(G)-Direct Plan | -0.062 | 0.016 | 0.052 | 0.071 |
These are the tracking errors for the only two older funds.
| Scheme Name | ICICI Pru Nifty Next 50 Index Fund(G)-Direct Plan | IDBI Nifty Junior Index Fund(G)-Direct Plan |
| 2 Years | 0.70 | 0.26 |
| 3 Years | 0.75 | 0.67 |
| 4 Years | 0.95 | 0.80 |
| 5 Years | 0.87 | 0.87 |
| 6 Years | 1.14 | 1.32 |
| 7 Years | 1.80 | 2.16 |
Beyond two years, there is much of a difference between the funds. The NN50 fund from IDBI has performed reasonably over both short and long durations. ICICI’s fund has not done well over the last two years in tracking NN50. A closer watch by its investors is necessary.
It is quite possible that the scenario could be different if we consider rolling tracking errors. We shall do this in a future article.
It would be premature to declare the UTI fund as the winner as it is too young and its investors should not assume its tracking efficiency would remain the same with time.
AUM in and outflows and market volatility and impact costs play a big role in maintaining a low tracking error. 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 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => 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 over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
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)