India Flagship Equity ETFs with Low Fees and Fair Trading Volumes 12Jun2025
(This
is for information purposes only. This should not be construed as a
recommendation or investment advice even though the author is a CFA Charterholder. Please consult your financial
adviser before taking any investment decision. Safe to assume the author has a vested
interest in stocks / investments discussed if any.)
(see update 18Jun2025 at the end of the article)
However, not all ETFs are created equal. To help investors navigate the growing landscape, this article identifies flagship India equity ETFs using four key selection filters:
low expense ratios,
low tracking error,
large assets under management (AUM),
and high average daily trading volumes.
These criteria ensure not only cost efficiency but also liquidity for smooth trade execution. Focusing only on ETFs tracking primary Indian indices—such as the Nifty 50 and Sensex—this analysis provides a data-backed shortlist for both retail investors seeking exposure to Indian stock market.
However, this is just for educational purposes and is strictly not meant to be investment advice.
Blog continues below...
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Related Blogs on Equity Passive Funds:
Low Expense Ratios, High Returns: Why Passive Equity Funds Matter
How to Buy Nifty Midcap 150 Index
India Passive Funds and Their Asset Size (Big picture view of Equity ETFs)
Equity ETFs and Equity Index Funds Compared
India Equity ETFs Worth Considering
Analysis of Nifty 100 Low Volatility 30 Index
India Equity ETF Risks and Returns
Nifty BeES: Making Risk-Less Profits
Junior Nifty BeES ETF: How to Make Higher Profits
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2. Select equity ETFs, their asset size, expense ratios, trading volumes, etc.
The table attached provides a snapshot of 14 equity ETFs based on four major stock indices, namely, Nifty 50, Sensex, Nifty Next 50 and Nifty Midcap 150.
The data include, AUM or assets under management, expense ratio, tracking error, daily average volume, daily average traded value in rupee terms and daily average number of trades.
The volume data presented here are for a period of one year between 12Jun2024 and 11Jun2025.
Observations from the above table:
> only volume data from NSE India stock exchange are taken, whereas BSE volume data are ignored, as ETF volumes on BSE are thin in most cases
> ETFs managed by public sector-owned mutual funds are ignored as they suffer from EPFO risk and may be detrimental to the interests of long term retail investors
> ETFs based on BSE Sensex may not be suitable for most of the investors because their trading volumes are very thin
> as can be observed from the above table, for example, ICICI Prudential BSE Sensex ETF has daily average volume of less than 10,000 (trade value Rs 84 lakh); and LIC MF BSE Sensex ETF has just a daily average volume of about 250 (traded value Rs 2.30 lakh)
> among the primary stock indices, ETFs based on Nifty 50 are the most popular -- their asset size is huge, expense ratios are very low between 0.03 and 0.05 per cent, their tracking errors too are very low and they have high trading volumes, in addition to high daily average number of trades
> for example, Mirae Asset Nifty 50 ETF has daily average trading volumes of 3.45 lakh, with daily average value of transactions being Rs 883 lakh
> ETFs based on Nifty Next 50 and Nifty Midcap 150 as presented in the above table too have decent trading volumes and considerable traded value -- the liquidity is good enough for retail investors
> many ETFs based on the above four flagship indices have AUM of less than Rs 200 crore; as such, they are ignored for the purpose of this analysis
> only top three or five ETFs based on an index are considered for this; as making a comprehensive analysis of all ETFs is outside the scope of this write-up
> you may have observed most of the 14 ETFs illustrated above are from
just three fund houses, namely, Nippon India, ICICI Prudential and Mirae
Asset -- we ignored PSU-owned ETFs here
3. Checklist before investing in equity ETFs
While ETFs offer simplicity, transparency and cost-efficiency, investors should still take a few essential precautions before investing:
a). Understand the underlying index -- Ensure you're familiar with the index the ETF tracks—be it the Nifty 50, Sensex, Nifty Next 50, or Midcap 150. Each has a different risk-return profile. For example, midcap indices may offer higher returns but come with greater volatility.
b). Look beyond just low expense ratios -- While expense ratios are crucial, they aren’t the only cost. Tracking error, bid-ask spreads, and trading costs also impact your overall returns. A slightly higher expense ratio may be acceptable if the ETF offers tighter tracking and better liquidity.
c). Evaluate liquidity: both in volume and value -- ETFs
priced below Rs 100 often witness higher trading volumes on stock
exchanges compared to those priced above, say, Rs 200. As such, focusing
solely on unit volumes can be misleading. It is equally important to
consider the average daily traded value in rupee terms, which provides a
more comprehensive view of real liquidity.
d). Avoid thinly-traded ETFs -- ETFs with very low trading activity may have wider bid-ask spreads, making it harder to buy or sell eficiently. This can hurt returns, especially for larger or more frequent transactions.
e). Watch out for PSU-backed ETFs -- ETFs managed by PSU-owned AMCs may carry unique risks—such as concentrated ownership by EPFO or other government institutions—which can impact liquidity and price discovery. Some of these ETFs are excluded from this analysis for that reason (PSU is public sector undertaking).
f). Understand the NAV-Price gap (premium or discount) -- ETFs trade on the stock exchange like shares, so their market price can deviate from the NAV (Net Asset Value), especially in low-liquidity situations. Persistent or large gaps between the NAV and trading price can lead to buying above fair value or selling below it—eroding potential returns.
In the past six months, there are several instances where ETFs based on foreign stock indices, like, Nasdaq and Hang Seng, have quoted at exorbitant premiums of 20 to 25 per cent above their underlying NAV or net asset value.
g). Tax Implications -- Equity ETFs based on Indian stock indices are taxed like equity-oriented mutual funds in India (however, it's better to consult your tax advisor before considering any investments).
4. Concluding remarks
Choosing the right India equity ETF goes beyond simply tracking a popular index. By applying filters such as low expense ratios, strong asset size and consistent trading volumes, investors can identify funds that offer better cost efficiency, reduced tracking error and ease of entry and exit.
As the Indian ETF ecosystem continues to mature, these parameters will become even more critical in distinguishing good investment avenues from less efficient ones.
As the Indian ETF ecosystem continues to mature, these parameters will become even more critical in distinguishing good investment avenues from less efficient ones.
Ultimately, a disciplined approach to ETF selection can significantly enhance portfolio performance—especially in a setting where minimising costs and maximising liquidity are key.
Stay informed, review fund metrics periodically and make sure your ETF choices are in line with your long-term investment goals.
Stay informed, review fund metrics periodically and make sure your ETF choices are in line with your long-term investment goals.
Investments discussed here are for informational and educational purpose only; readers must be guided by their investment / financial / tax advisors before considering any investments.
- - -
P.S.: The following update is added after the blog was published on 12Jun2025:
On 18Jun2025, I came to know EPFO started investing (wef 03Jul2023) in ETFs based on Nifty 50 and Sensex indices from Nippon India MF and ICICI Prudential MF, in addition to those from SBI MF and UTI MF (the details were highlighted on 19Jun2025 in charts 51 to 55 of Indian Economy data bank).
Retail investors are better off if they avoid investing in the following 10 ETFs, due to large investor risk or EPFO risk >
References:
Weblinks to check Volumes of the ETFs are given below:
ETF Volumes data:
Volumes for ETFs are extremely important to consider before investing.
NSE Market Watch - Exchange Traded Funds / ETFs (to check volumes)
Nifty 50 ETFs (only top 5) with highest AUMs as of 31May2025 (ignored ETFs of PSU-owned AMCs)
Nippon India ETF Nifty 50 BeES
ICICI Pru Nifty 50 ETF
Mirae Asset Nifty 50 ETF
HDFC Nifty 50 ETF
Aditya Birla SL Nifty 50 ETF
ICICI Pru Nifty 50 ETF
Mirae Asset Nifty 50 ETF
HDFC Nifty 50 ETF
Aditya Birla SL Nifty 50 ETF
BSE Sensex ETFs (only top 3) with highest AUMs as of 31May2025 (ignored ETFs of PSU-owned AMCs)
ICICI Pru BSE Sensex ETF
LIC MF BSE Sensex ETF
HDFC BSE Sensex ETF
Nippon India BSE Sensex ETF (not traded on NSE)
Nifty Next 50 ETFs (only top 3) with highest AUMs as of 31May2025 (ignored ETFs of PSU-owned AMCs)
Nippon India ETF Nifty Next 50 Junior BeES
ICICI Pru Nifty Next 50 ETF
Mirae Asset Nifty Next 50 ETF
Nifty Midcap 150 ETFs (only top 5) with highest AUMs as of 31May2025 (ignored ETFs of PSU-owned AMCs)
Nippon India ETF Nifty Midcap 150
Mirae Asset Nifty Midcap 150 ETF
ICICI Pru Nifty Midcap 150 ETF
(note:
you may have observed most of the 14 ETFs illustrated above are from
just three fund houses, namely, Nippon India, ICICI Prudential and Mirae
Asset -- we ignored PSU-owned ETFs here)
AMFI India weblink for tracking error data
ETFs and their unique EPFO risk
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Read more:
Blog of Blogs Theme-wise
Weblinks and Investing
India Fixed Income Data Bank
Indian Economy Data Bank
India Forex Data Bank
India Flagship ETFs with Low Fees and Fair Trading Volumes 12Jun2025
Low Expense Ratios, High Returns: Why Passive Equity Funds Matter 06Jun2025
Mutual Fund Asset Class Returns 02Jun2025
Currency Woes Put Pressure on US Equities and Bonds 22Apr2025
JP Morgan Guide to Markets 31Mar2025
Loss of First-mover Advantage
India's Most-Profitable Sectors: Where Big Earnings Are Made 10Mar2025
NSE Indices Comparison 31Dec2024
JP Morgan Guide to Markets 31Dec2024
Corporate Groups and Listed Companies 29Dec2024
Corporate Governance Concerns - Indian Companies 13Dec2024
Opinion on Maharashtra Seamless 15Nov2024
Wars and Wealth Protection
Mutual Fund Asset Class Returns 30Sep2024
Primer on Global Capability Centres - India is World's GCC Capital
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Disclosure: I've got a vested interest in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and
opinion provided here are only for information purposes and should not be construed
as investment advice. Investors should consult their own financial advisers
before making any investments. The author is a CFA Charterholder with a vested
interest in financial markets.
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