Comparing NASDAQ fund options: ETF vs Index fund vs FOF
Indian investors now have multiple ways to track the NASDAQ 100 index through mutual funds and ETFs. Each vehicle wraps the same 100 stocks in a different structure. The right choice depends on your investment size, holding period, and trading preference. Picking the wrong one can cost you lakhs over a decade in hidden fees and tax drag.
The NASDAQ ETF vs. index fund debate in India has a twist that most global comparisons overlook. SEBI's $7 billion overseas investment cap has frozen several popular funds since 2022. Only two passive NASDAQ 100 mutual funds remain fully open for fresh investments in early 2026. This regulatory bottleneck makes the comparison far more practical than theoretical. Understanding how eachfund-of-fundss structure, ETF listing, and direct index fund works will help you allocate with confidence.
How a NASDAQ 100 ETF works in India
India has only one NASDAQ 100 ETF—the Motilal Oswal NASDAQ 100 ETF, which trades on the NSE and BSE under the ticker MON100. Launched in 2011, it manages over ₹11,200 crore in assets. The fund directly holds all 100 constituent stocks of the NASDAQ 100 index.
You buy and sell ETF units on the stock exchange during market hours, just like any share. This requires a demat account and a trading account with a broker. The current unit price is around ₹227. You cannot set up an automatic SIP through most brokers for ETF purchases.
The ETF charges a total expense ratio of 0.58% per year. This looks low at first glance. But you also pay brokerage on every trade, Securities Transaction Tax of 0.1% on each side, DP charges of ₹15 per sell transaction, and stamp duty. These hidden costs push the effective annual expense well above 1% for small investors.
A bigger problem is the premium-to-NAV ratio. SEBI's overseas cap prevents the AMC from freely creating new ETF units. Market makers cannot arbitrage the price back to fair value. The ETF routinely trades at a 1% to 5% premium over its actual net asset value. You essentially overpay for every rupee of NASDAQ 100 exposure.
What makes an index fund different
An index fund buys the same stocks as the index it tracks. It operates as a regular mutual fund with end-of-day NAV pricing. You do not need a demat account. SIPs work seamlessly with auto-debit from your bank account.
The ICICI Prudential NASDAQ 100 Index Fund is the only true index fund for this benchmark in India. It launched in October 2021 and holds ₹2,622 crore in assets. The direct plan charges a 0.61% expense ratio. It directly owns NASDAQ 100 stocks without any underlying fund layer.
However, this fund is currently suspended for fresh investments. SEBI's overseas limit left no headroom for new subscriptions. Existing investors can remain invested and redeem, but no new SIPs or lump-sum contributions are accepted. This makes the only NASDAQ 100 index fund practically unavailable for new investors in 2026.
Understanding the fund of funds structure
A fund of funds does not buy stocks directly. It invests in another fund that tracks the index. This creates two layers of management. The Indian FoF charges its own expense ratio. The underlying overseas ETF charges a separate fee. Your effective cost is the sum of both layers.
Despite this double layer, two NASDAQ 100 FoFs in India are cheaper than the ETF. The Navi NASDAQ 100 FoF invests in the Invesco QQQ-tracking UCITS ETF with a combined effective cost of just 0.23%. The Kotak NASDAQ 100 FoF uses an iShares NASDAQ 100 UCITS ETF and incurs a 0.31% all-in cost. Both funds remain open to new investments, with a minimum SIP of ₹100.
The Motilal Oswal NASDAQ 100 FoF takes a different path. It invests in its own domestic ETF, which already charges 0.58%. Adding the FoF layer pushes the total effective cost to roughly 0.80%. This fund suspended fresh subscriptions in January 2025 due to the overseas cap.
GIFT City is opening a new chapter for FoFs. PPFAS received IFSCA approval in November 2025 for a NASDAQ 100 FoF domiciled in Gujarat's International Financial Services Centre. This fund operates outside SEBI's $7 billion ceiling because IFSCA regulates it independently. The minimum investment is expected to be $5,000, with an estimated cost of 0.40%-0.50%.
Cost comparison across all three options
The discussion on cost comparison funds in India must go beyond headline expense ratios. Transaction costs, premium risk, and demat charges significantly affect the ETF landscape.
Here is what each option costs annually on a ₹1 lakh investment. The Motilal Oswal ETF charges ₹580 in fund expenses, plus ₹200 in round-trip STT, ₹15 in DP charges, ₹15 in stamp duty, and ₹100 to ₹300 in pro-rated demat AMC fees. Add variable impact costs ranging from ₹100 to ₹500 based on order size. The total reaches ₹1,010 to ₹1,610 per year.
The Navi FoF costs just ₹235 per ₹1 lakh, all-in. The Kotak FoF costs ₹315 and does not charge STT, brokerage, DP, or demat AMC. There is no premium-to-NAV risk because you always transact at the declared NAV.
Over 20 years, the gap between 0.23% and 0.80% effective cost on a ₹10 lakh investment at 15% annual return compounds to roughly ₹8 to ₹10 lakh in lost wealth. SEBI's December 2025 regulations cap the base expense ratio for index funds, ETFs, and index FoFs at 0.90%. Exit loads are zero across most NASDAQ 100 funds. The Motilal Oswal FoF charges 1% if you redeem within 15 days.
Tax efficiency across ETFs, index funds, and FoFs
The tax efficiency funds framework changed significantly from FY 2025-26. The Finance Act 2023 had classified all funds with 35% or less domestic equity as "specified mutual funds" under Section 50AA. This forced gains to be taxed at slab rates, regardless of how long you held them. International fund investors faced rates as high as 30% plusa surcharge.
Budget 2024 rewrote these rules. It amended the Section 50AA definition to cover only funds with over 65% in debt instruments. Since NASDAQ 100 funds invest in international equities rather than debt, they were exempt from the punitive classification from April 2025 onward. Long-term capital gains tax is returned at a flat 12.5% under Section 112.
The critical difference lies in the holding period. Listed ETFs qualify for long-term treatment after just 12 months. Unlisted mutual fund schemes, including index funds and FoFs, required a 24-month holding period. Both pay the same 12.5% LTCG rate. Short-term gains on all three options are subject to your income tax slab rate, which can go up to 30% plus surcharge.
The ₹1.25 lakh annual LTCG exemption under Section 112A does not apply to any NASDAQ 100 product. None of these funds meet the 65% domestic equity threshold required for that benefit. This makes the ETF's 12-month holding period its single genuine tax advantage over FoFs.
GIFT City funds handle taxation at the fund level itself. The fund pays tax on gains before distributing proceeds. Investors receive net-of-tax redemption amounts with no additional capital gains filing needed. This simplifies compliance but imposes a higher short-term rate of roughly 42.7% at the fund level for holdings under two years.
Liquidity difference between the three options
The liquidity difference funds investors face depends on whether they value real-time pricing or guaranteed NAV execution.
The ETF trades live on NSE between 9:15 AM and 3:30 PM IST. However, NASDAQ 100 stocks trade from 7:00 PM to 1:30 AM IST. This time-zone mismatch means the ETF's daytime price reflects the previous night's U.S. close plus futures-based estimates. It does not capture live movement in the underlying stocks.
Average daily volume for MON100 is approximately 4.8 lakh shares, with a value of ₹11- ₹12 crore. Bid-ask spreads stay between 0.1% and 0.3% during active hours but widen to 0.5% or more during low-volume periods. The restricted unit creation mechanism amplifies price distortion in the U.S. during volatile U.S. sessions.
Index funds and FoFs transact at end-of-day NAV with a 3:00 PM cut-off. There is zero bid-ask spread and zero premium risk. Redemption takes T+3 business days for domestic schemes and T+5 or longer for international FoFs due to the underlying ETF's settlement cycle. FoFs also face a one-day NAV publication delay because the overseas ETF's closing price is only available after U.S. market hours.
For buy-and-hold investors running SIPs, the FoF's guaranteed NAV execution matters more than intraday trading ability. The ETF's real-time access only benefits tactical traders who act on U.S. market events during Indian hours.
Best option by investment size
For SIP investors putting in ₹500 to ₹5,000 per month, mutual fund FoFs are the only practical choice. The Navi NASDAQ 100 FoF accepts SIPs from ₹100 with a total cost of 0.23%. One ETF unit costs around ₹227 with no automated SIP facility. DP charges of ₹15 per sell represent 1.5% on a ₹1,000 trade, which destroys returns at small ticket sizes.
For medium investments of ₹5,000 to ₹50,000, FoFs still dominate. Transaction costs on the ETF continue to outweigh any expense ratio difference. Automated SIPs with step-up options, zero brokerage, and reliable NAV pricing make FoFs clearly superior at this range.
For lump sums above ₹50,000, the maths stays similar. Navi at 0.23% and Kotak at 0.31% are both cheaper than the ETF's 0.58% base expense plus transaction costs. The ETF only makes sense if you specifically want intraday trading or spot a rare discount-to-NAV situation.
For HNI investors above ₹10 lakh, consider splitting across routes. The Kotak FoF is attractive because its underlying Ireland-domiciled U.S. CITS ETF avoids U.S. estate tax exposure. Direct U.S. investment via LRS in QQQ at 0.20% expense is another option for those comfortable with compliance. When PPFAS launches its
GIFT City NASDAQ 100 FoFundill add a compelling USD-denominated route with simplified fund-level taxation.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
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Indian investors now have multiple ways to track the NASDAQ 100 index through mutual funds and ETFs. Each vehicle wraps the same 100 stocks in a different structure. The right choice depends on your investment size, holding period, and trading preference. Picking the wrong one can cost you lakhs over a decade in hidden fees and tax drag.
The NASDAQ ETF vs. index fund debate in India has a twist that most global comparisons overlook. SEBI's $7 billion overseas investment cap has frozen several popular funds since 2022. Only two passive NASDAQ 100 mutual funds remain fully open for fresh investments in early 2026. This regulatory bottleneck makes the comparison far more practical than theoretical. Understanding how eachfund-of-fundss structure, ETF listing, and direct index fund works will help you allocate with confidence.
How a NASDAQ 100 ETF works in India
India has only one NASDAQ 100 ETF—the Motilal Oswal NASDAQ 100 ETF, which trades on the NSE and BSE under the ticker MON100. Launched in 2011, it manages over ₹11,200 crore in assets. The fund directly holds all 100 constituent stocks of the NASDAQ 100 index.
You buy and sell ETF units on the stock exchange during market hours, just like any share. This requires a demat account and a trading account with a broker. The current unit price is around ₹227. You cannot set up an automatic SIP through most brokers for ETF purchases.
The ETF charges a total expense ratio of 0.58% per year. This looks low at first glance. But you also pay brokerage on every trade, Securities Transaction Tax of 0.1% on each side, DP charges of ₹15 per sell transaction, and stamp duty. These hidden costs push the effective annual expense well above 1% for small investors.
A bigger problem is the premium-to-NAV ratio. SEBI's overseas cap prevents the AMC from freely creating new ETF units. Market makers cannot arbitrage the price back to fair value. The ETF routinely trades at a 1% to 5% premium over its actual net asset value. You essentially overpay for every rupee of NASDAQ 100 exposure.
What makes an index fund different
An index fund buys the same stocks as the index it tracks. It operates as a regular mutual fund with end-of-day NAV pricing. You do not need a demat account. SIPs work seamlessly with auto-debit from your bank account.
The ICICI Prudential NASDAQ 100 Index Fund is the only true index fund for this benchmark in India. It launched in October 2021 and holds ₹2,622 crore in assets. The direct plan charges a 0.61% expense ratio. It directly owns NASDAQ 100 stocks without any underlying fund layer.
However, this fund is currently suspended for fresh investments. SEBI's overseas limit left no headroom for new subscriptions. Existing investors can remain invested and redeem, but no new SIPs or lump-sum contributions are accepted. This makes the only NASDAQ 100 index fund practically unavailable for new investors in 2026.
Understanding the fund of funds structure
A fund of funds does not buy stocks directly. It invests in another fund that tracks the index. This creates two layers of management. The Indian FoF charges its own expense ratio. The underlying overseas ETF charges a separate fee. Your effective cost is the sum of both layers.
Despite this double layer, two NASDAQ 100 FoFs in India are cheaper than the ETF. The Navi NASDAQ 100 FoF invests in the Invesco QQQ-tracking UCITS ETF with a combined effective cost of just 0.23%. The Kotak NASDAQ 100 FoF uses an iShares NASDAQ 100 UCITS ETF and incurs a 0.31% all-in cost. Both funds remain open to new investments, with a minimum SIP of ₹100.
The Motilal Oswal NASDAQ 100 FoF takes a different path. It invests in its own domestic ETF, which already charges 0.58%. Adding the FoF layer pushes the total effective cost to roughly 0.80%. This fund suspended fresh subscriptions in January 2025 due to the overseas cap.
GIFT City is opening a new chapter for FoFs. PPFAS received IFSCA approval in November 2025 for a NASDAQ 100 FoF domiciled in Gujarat's International Financial Services Centre. This fund operates outside SEBI's $7 billion ceiling because IFSCA regulates it independently. The minimum investment is expected to be $5,000, with an estimated cost of 0.40%-0.50%.
Cost comparison across all three options
The discussion on cost comparison funds in India must go beyond headline expense ratios. Transaction costs, premium risk, and demat charges significantly affect the ETF landscape.
Here is what each option costs annually on a ₹1 lakh investment. The Motilal Oswal ETF charges ₹580 in fund expenses, plus ₹200 in round-trip STT, ₹15 in DP charges, ₹15 in stamp duty, and ₹100 to ₹300 in pro-rated demat AMC fees. Add variable impact costs ranging from ₹100 to ₹500 based on order size. The total reaches ₹1,010 to ₹1,610 per year.
The Navi FoF costs just ₹235 per ₹1 lakh, all-in. The Kotak FoF costs ₹315 and does not charge STT, brokerage, DP, or demat AMC. There is no premium-to-NAV risk because you always transact at the declared NAV.
Over 20 years, the gap between 0.23% and 0.80% effective cost on a ₹10 lakh investment at 15% annual return compounds to roughly ₹8 to ₹10 lakh in lost wealth. SEBI's December 2025 regulations cap the base expense ratio for index funds, ETFs, and index FoFs at 0.90%. Exit loads are zero across most NASDAQ 100 funds. The Motilal Oswal FoF charges 1% if you redeem within 15 days.
Tax efficiency across ETFs, index funds, and FoFs
The tax efficiency funds framework changed significantly from FY 2025-26. The Finance Act 2023 had classified all funds with 35% or less domestic equity as "specified mutual funds" under Section 50AA. This forced gains to be taxed at slab rates, regardless of how long you held them. International fund investors faced rates as high as 30% plusa surcharge.
Budget 2024 rewrote these rules. It amended the Section 50AA definition to cover only funds with over 65% in debt instruments. Since NASDAQ 100 funds invest in international equities rather than debt, they were exempt from the punitive classification from April 2025 onward. Long-term capital gains tax is returned at a flat 12.5% under Section 112.
The critical difference lies in the holding period. Listed ETFs qualify for long-term treatment after just 12 months. Unlisted mutual fund schemes, including index funds and FoFs, required a 24-month holding period. Both pay the same 12.5% LTCG rate. Short-term gains on all three options are subject to your income tax slab rate, which can go up to 30% plus surcharge.
The ₹1.25 lakh annual LTCG exemption under Section 112A does not apply to any NASDAQ 100 product. None of these funds meet the 65% domestic equity threshold required for that benefit. This makes the ETF's 12-month holding period its single genuine tax advantage over FoFs.
GIFT City funds handle taxation at the fund level itself. The fund pays tax on gains before distributing proceeds. Investors receive net-of-tax redemption amounts with no additional capital gains filing needed. This simplifies compliance but imposes a higher short-term rate of roughly 42.7% at the fund level for holdings under two years.
Liquidity difference between the three options
The liquidity difference funds investors face depends on whether they value real-time pricing or guaranteed NAV execution.
The ETF trades live on NSE between 9:15 AM and 3:30 PM IST. However, NASDAQ 100 stocks trade from 7:00 PM to 1:30 AM IST. This time-zone mismatch means the ETF's daytime price reflects the previous night's U.S. close plus futures-based estimates. It does not capture live movement in the underlying stocks.
Average daily volume for MON100 is approximately 4.8 lakh shares, with a value of ₹11- ₹12 crore. Bid-ask spreads stay between 0.1% and 0.3% during active hours but widen to 0.5% or more during low-volume periods. The restricted unit creation mechanism amplifies price distortion in the U.S. during volatile U.S. sessions.
Index funds and FoFs transact at end-of-day NAV with a 3:00 PM cut-off. There is zero bid-ask spread and zero premium risk. Redemption takes T+3 business days for domestic schemes and T+5 or longer for international FoFs due to the underlying ETF's settlement cycle. FoFs also face a one-day NAV publication delay because the overseas ETF's closing price is only available after U.S. market hours.
For buy-and-hold investors running SIPs, the FoF's guaranteed NAV execution matters more than intraday trading ability. The ETF's real-time access only benefits tactical traders who act on U.S. market events during Indian hours.
Best option by investment size
For SIP investors putting in ₹500 to ₹5,000 per month, mutual fund FoFs are the only practical choice. The Navi NASDAQ 100 FoF accepts SIPs from ₹100 with a total cost of 0.23%. One ETF unit costs around ₹227 with no automated SIP facility. DP charges of ₹15 per sell represent 1.5% on a ₹1,000 trade, which destroys returns at small ticket sizes.
For medium investments of ₹5,000 to ₹50,000, FoFs still dominate. Transaction costs on the ETF continue to outweigh any expense ratio difference. Automated SIPs with step-up options, zero brokerage, and reliable NAV pricing make FoFs clearly superior at this range.
For lump sums above ₹50,000, the maths stays similar. Navi at 0.23% and Kotak at 0.31% are both cheaper than the ETF's 0.58% base expense plus transaction costs. The ETF only makes sense if you specifically want intraday trading or spot a rare discount-to-NAV situation.
For HNI investors above ₹10 lakh, consider splitting across routes. The Kotak FoF is attractive because its underlying Ireland-domiciled U.S. CITS ETF avoids U.S. estate tax exposure. Direct U.S. investment via LRS in QQQ at 0.20% expense is another option for those comfortable with compliance. When PPFAS launches its
GIFT City NASDAQ 100 FoFundill add a compelling USD-denominated route with simplified fund-level taxation.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
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Invest in 11,000+ US stocks & ETFs
