NASDAQ vs S&P 500: Which index should Indian investors choose?
The S&P 500 offers broader diversification and lower volatility. NASDAQ-100 delivers superior returns for investors who can stomach sharper drawdowns. For most Indian investors, a blended approach is most effective. Use the S&P 500 as a core holding at 70% and the NASDAQ-100 as a growth satellite at 30%. This combination provides an optimal balance between risk and reward.
Over the past 18 years, the NASDAQ-100 delivered 1,342% cumulative returns versus the S&P 500's 560%. However, this outperformance was accompanied by an 83% drawdown during the dot-com crash, compared with the S&P 500's 49% drawdown. The rupee's historical 3-4% annual depreciation against the dollar adds another 3-4 percentage points to returns for Indian investors. This currency tailwind makes U.S. index investing particularly attractive.
How these indices differ fundamentally
The structural differences between NASDAQ-100 and S&P 500 determine their risk-return profiles and suitability for different investor types.
NASDAQ-100 contains exactly 100 of the largest non-financial companies listed on the NASDAQ exchange. Its defining characteristic is the explicit exclusion of financial sector stocks. No banks, insurance companies, or asset managers appear in this index. Selection follows primarily rules-based criteria. Companies are ranked by market capitalisation, with a minimum daily trading volume of 200,000 shares. The index is reconstituted annually every December.
S&P 500 comprises 500 large-cap U.S. companies selected by a committee rather than by purely mechanical rules. Companies must meet stringent criteria, including a minimum market capitalisation of $22.7 billion. This threshold increased from $20.5 billion in July 2025. Companies also require positive GAAP earnings for the most recent quarter and for the trailing four quarters combined. This profitability requirement creates a quality screen absent from the NASDAQ-100.
Approximately 80% of NASDAQ-100 companies also appear in the S&P 500. This overlap increased from less than 50% fifteen years ago as tech giants grew. Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla dominate both indexes. The key exclusives from the S&P 500 include NYSE-listed giants such as Berkshire Hathaway, JPMorgan Chase, Visa, Eli Lilly, UnitedHealth, and ExxonMobil. These represent sectors that are virtually absent from the NASDAQ-100.
Tech dominance shapes sector weightings dramatically.
Differences in sector composition explain why these indices behave so differently across market conditions.
NASDAQ-100's technology concentration is roughly twice that of the S&P 500. Using the standard GICS classification, technology comprises 52.7% of the NASDAQ-100 versus 35.0% of the S&P 500. When Alphabet and Meta are classified as Communication Services under the GICS methodology but as technology under the ICB methodology, the NASDAQ-100's technology exposure reaches 64.6%.
The financial sector tells a striking story. S&P 500 allocates 13.2% to financials while NASDAQ-100 excludes them by design, showing only 0.3% exposure. Healthcare accounts for 9.9% of the S&P 500 but only 5.4% of the NASDAQ-100. Energy comprises 2.9% of the S&P 500 versus 0.5% in the NASDAQ-100.
The Magnificent Seven stocks reveal concentrated exposure in both indexes. Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla account for 62.3% of the NASDAQ-100 but only 33.8% of the S&P 500. NVIDIA leads the NASDAQ-100 at 12.9% weight versus 7.2% in the S&P 500. Apple follows at 11.4% on the NASDAQ, versus 5.9% on the S&P.
Over the past five years, the S&P 500's technology weighting increased from approximately 27% to 35%. This represents a 7-8 percentage point surge driven by AI enthusiasm. The Magnificent Seven's S&P 500 weight grew from 12.3% in 2015 to 33.8% in January 2026. This raises concerns about concentration, even in the diversified index.
Historical returns favour NASDAQ with important caveats.
NASDAQ-100 has dramatically outperformed the S&P 500 across nearly all extended periods. However, this comes with significantly higher volatility and catastrophic drawdowns during specific crises.
Looking at recent performance from 2020 to 2025, the picture varies by year. In 2025, the NASDAQ-100 returned 20.2%, while the S&P 500 returned 17.9%. In 2024, results were essentially tied, with the NASDAQ at 24.9% and the S&P at 25.0%. In 2023, the NASDAQ outperformed the S&P by 53.8%, whereas the S&P returned 26.3%.
The 2022 bear market revealed NASDAQ's vulnerability. The NASDAQ-100 dropped 33.0% while the S&P 500 fell only 18.1%. This 14.9 percentage-point gap indicates that tech-heavy indexes underperform in rising interest-rate environments.
Long-term compounding from 2007 to 2025 tells a compelling story. NASDAQ-100 achieved 16.0% CAGR with 1,342% cumulative return. S&P 500 delivered 11.1% CAGR with 560% cumulative return. NASDAQ-100 outperformed in 14 of 18 calendar years, representing a 78% win rate.
A $10,000 investment ten years ago would be worth approximately $50,000 to $60,000 in NASDAQ-100 versus $30,000 to $35,000 in S&P 500.
Major crises reveal crucial differences in drawdown severity. During the dot-com crash from 2000 to 2002, the NASDAQ-100 lost 82.9% while the S&P 500 dropped 49.1%. NASDAQ took roughly 15 years to recover. During the 2008 financial crisis, the NASDAQ-100 fell 53.5% while the S&P 500 dropped 56.8%. NASDAQ actually outperformed because it excluded the financial sector that caused the meltdown.
For Indian investors, rupee depreciation adds substantial returns. The USD has appreciated roughly 3-4% annually against INR historically. From October 2010 to October 2023, the S&P 500 delivered 280% returns in USD but 597% returns in INR.
Risk and volatility analysis shows apparent differences
Understanding risk metrics helps investors set appropriate expectations and avoid panic selling during inevitable drawdowns.
NASDAQ-100 carries a beta of 1.17, meaning it moves 17% more than the S&P 500 benchmark. Annualised volatility is approximately 17.9% for NASDAQ and 13.1% for S&P. Daily return correlation is 93%, indicating high correlation but differing magnitudes. Rolling volatility differential averages 2.7-2.8% higher for NASDAQ.
Risk-adjusted returns favour NASDAQ despite its higher volatility. The current Sharpe ratio is 0.71 for the NASDAQ-100 and 0.63 for the S&P 500. The 2023 Sharpe ratio showed QQQ at 2.35 versus SPY at 1.55.
Maximum drawdowns present the starkest comparison. The NASDAQ-100's worst-ever drawdown reached 82.9% during the dot-com crash. The S&P 500's worst decline was 56.8% during the 2008 financial crisis. The worst drawdowns in 2022 showed the NASDAQ at 33% versus the S&P at 25.4%.
Interest rate sensitivity accounts for the 2022 divergent performance. NASDAQ-100 companies are long-duration assets. Their valuations depend heavily on distant future earnings. When the Federal Reserve raised rates 11 times during 2022-2023, higher discount rates crushed tech valuations.
Dividend yields and current valuations
Current valuations are elevated relative to historical standards. Dividend yields remain near record lows, particularly for the NASDAQ-100.
QQQ tracking NASDAQ-100 offers a dividend yield of 0.45-0.51%. SPY tracking S&P 500 yields 1.05-1.07%. VOO yields slightly higher at 1.11%. The historical median yield on the S&P 500 is 2.875%, placing current yields near record lows.
Only 58 of 101 NASDAQ-100 stocks pay any dividend compared to the vast majority of S&P 500 constituents. However, share buybacks have become the dominant mechanism for shareholder returns. S&P 500 companies repurchased a record $1.1 trillion in 2025.
Current valuation metrics show premium pricing across both indexes. NASDAQ-100 trades at a trailing P/E of 32-38x while the S&P 500 trades at 29.5x. The S&P 500's historical average is approximately 17x, indicating that both indexes trade at significant premiums.
Current index levels as of February 2026 show the S&P 500 at approximately 6,890 to 6,900, while the NASDAQ Composite sits near 23,592. Analysts project S&P 500 earnings growth of 12-14.7% for the full year 2026.
Investment options available to Indian investors
Indian investors can access these indexes through direct U.S. or India-domiciled funds, each with distinct trade-offs.
For a comprehensive guide on investing in U.S. stocks through ETFs from India, explore our detailed breakdown of popular options like QQQ and VOO.
U.S. ETFs accessible via the LRS route include several low-cost options. VOO and IVV track the S&P 500 at just 0.03% expense ratio. SPY tracks the S&P 500 at 0.0945% but offers the best liquidity. QQQM tracks the NASDAQ-100 at 0.15% while QQQ charges 0.18% with the highest liquidity.
Indian mutual funds tracking the NASDAQ-100 include Motilal Oswal NASDAQ 100 FoF, with a 0.20% expense ratio and AUM of ₹6,159 crore. Kotak NASDAQ 100 FoF charges 0.24-0.55% with ₹3,770 crore AUM. Navi US NASDAQ 100 FoF charges 0.30% and has ₹1,071 crore in AUM.
Indian mutual funds tracking the S&P 500 include Motilal Oswal S&P 500 Index Fund, with a 0.63% expense ratio and ₹4,103 crore in AUM. Mirae Asset S&P 500 Top 50 ETF charges 0.60% with ₹1,008 crore AUM.
Direct U.S. ETFs are more cost-effective for investments above ₹20-30 lakh held long-term. For smaller amounts or SIP investors, Indian funds offer better convenience despite higher expense ratios.
SEBI regulatory constraints affect fund availability. The industry-wide overseas investment limit of $7 billion periodically causes fund closures. Always verify fund availability before investing.
Tax implications every Indian investor must understand
The 2024 Budget changes significantly altered international fund taxation. Understanding these rules is essential for optimising after-tax returns.
Capital gains taxation for FY 2025-26 treats holding periods differently. Gains on holdings held for up to 24 months are subject to slab-rate taxation at up to 30%, plus a surcharge. Gains on holdings exceeding 24 months face a flat 12.5% LTCG tax without indexation.
The ₹1.25 lakh LTCG exemption applies only to domestic equity funds with 65% or more Indian equity. International funds receive no exemption. Every rupee of LTCG gets taxed at 12.5%.
Dividend taxation entails a 25% U.S. withholding tax. Focus on the source, reduced from 30% under a DTAA. Investors must declare gross dividends in the Indian ITR and can claim Foreign Tax Credit via Form 67 to avoid double taxation.
Portfolio allocation strategies for different investor profiles
Optimal allocation depends on age, risk tolerance, portfolio size, and investment goals. The recommendedUS allocation within the total portfolio varies with portfolio size. For portfolios under ₹10-25 lakh, allocate 0-10% to U.S. markets. The U.S. prioritises the domestic market. For ₹25 lakh to ₹1 crore, allocate 10-20% for meaningful diversification. For portfolios exceeding ₹1 crore, allocate 15-20% for complete international diversification.
The allocation between the S&P 500 and the NASDAQ-100 in the U.S. portfolio depends on investor type. Conservative investors should allocate 100% to the S&P 500 with no NASDAQ exposure. Moderate investors should allocate 70% to the S&P and 30% to the NASDAQ for balanced growth. Aggressive investors can split 50-50 to achieve higher returns with greater volatility.
Age-based recommendations suggest that younger investors in their 20s-30s can use a 60:40 or 50:50 S&P-to-NASDAQ split. Investors in their 40s should shift to a 70:30 allocation favouring S&P. Investors in their 50s should use an 80:20 allocation. Retirees in their 60s should focus entirely on the S&P 500 for stability.
Warren Buffett recommends 90% of portfolios in a low-cost S&P 500 index fund for long-term wealth accumulation.
Learn the complete process of how to invest in the S&P 500 from India, including platforms, taxation, and step-by-step guidance.
For most Indian investors, allocating 15-20% of total equity to U.S. markets, with a 70:30 split between the S&P 500 and NASDAQ-100, provides optimal diversification. Use the Indian Fund of Funds for amounts under ₹30 lakh. Consider direct U.S. ETFs forU.S.arger portfolios. Hold for a minimum of 24 months to qualify for 12.5% LTCG treatment rather than slab-rate STCG.
The rupee's structural depreciation against the dollar means a U.S. index provides both market returns and currency gains. This combination makes a compelling case for Indian portfolios seeking genuine international diversification.
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.
Ready to earn on every trade?
Invest in 11,000+ US stocks & ETFs
Table of Contents
The S&P 500 offers broader diversification and lower volatility. NASDAQ-100 delivers superior returns for investors who can stomach sharper drawdowns. For most Indian investors, a blended approach is most effective. Use the S&P 500 as a core holding at 70% and the NASDAQ-100 as a growth satellite at 30%. This combination provides an optimal balance between risk and reward.
Over the past 18 years, the NASDAQ-100 delivered 1,342% cumulative returns versus the S&P 500's 560%. However, this outperformance was accompanied by an 83% drawdown during the dot-com crash, compared with the S&P 500's 49% drawdown. The rupee's historical 3-4% annual depreciation against the dollar adds another 3-4 percentage points to returns for Indian investors. This currency tailwind makes U.S. index investing particularly attractive.
How these indices differ fundamentally
The structural differences between NASDAQ-100 and S&P 500 determine their risk-return profiles and suitability for different investor types.
NASDAQ-100 contains exactly 100 of the largest non-financial companies listed on the NASDAQ exchange. Its defining characteristic is the explicit exclusion of financial sector stocks. No banks, insurance companies, or asset managers appear in this index. Selection follows primarily rules-based criteria. Companies are ranked by market capitalisation, with a minimum daily trading volume of 200,000 shares. The index is reconstituted annually every December.
S&P 500 comprises 500 large-cap U.S. companies selected by a committee rather than by purely mechanical rules. Companies must meet stringent criteria, including a minimum market capitalisation of $22.7 billion. This threshold increased from $20.5 billion in July 2025. Companies also require positive GAAP earnings for the most recent quarter and for the trailing four quarters combined. This profitability requirement creates a quality screen absent from the NASDAQ-100.
Approximately 80% of NASDAQ-100 companies also appear in the S&P 500. This overlap increased from less than 50% fifteen years ago as tech giants grew. Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla dominate both indexes. The key exclusives from the S&P 500 include NYSE-listed giants such as Berkshire Hathaway, JPMorgan Chase, Visa, Eli Lilly, UnitedHealth, and ExxonMobil. These represent sectors that are virtually absent from the NASDAQ-100.
Tech dominance shapes sector weightings dramatically.
Differences in sector composition explain why these indices behave so differently across market conditions.
NASDAQ-100's technology concentration is roughly twice that of the S&P 500. Using the standard GICS classification, technology comprises 52.7% of the NASDAQ-100 versus 35.0% of the S&P 500. When Alphabet and Meta are classified as Communication Services under the GICS methodology but as technology under the ICB methodology, the NASDAQ-100's technology exposure reaches 64.6%.
The financial sector tells a striking story. S&P 500 allocates 13.2% to financials while NASDAQ-100 excludes them by design, showing only 0.3% exposure. Healthcare accounts for 9.9% of the S&P 500 but only 5.4% of the NASDAQ-100. Energy comprises 2.9% of the S&P 500 versus 0.5% in the NASDAQ-100.
The Magnificent Seven stocks reveal concentrated exposure in both indexes. Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla account for 62.3% of the NASDAQ-100 but only 33.8% of the S&P 500. NVIDIA leads the NASDAQ-100 at 12.9% weight versus 7.2% in the S&P 500. Apple follows at 11.4% on the NASDAQ, versus 5.9% on the S&P.
Over the past five years, the S&P 500's technology weighting increased from approximately 27% to 35%. This represents a 7-8 percentage point surge driven by AI enthusiasm. The Magnificent Seven's S&P 500 weight grew from 12.3% in 2015 to 33.8% in January 2026. This raises concerns about concentration, even in the diversified index.
Historical returns favour NASDAQ with important caveats.
NASDAQ-100 has dramatically outperformed the S&P 500 across nearly all extended periods. However, this comes with significantly higher volatility and catastrophic drawdowns during specific crises.
Looking at recent performance from 2020 to 2025, the picture varies by year. In 2025, the NASDAQ-100 returned 20.2%, while the S&P 500 returned 17.9%. In 2024, results were essentially tied, with the NASDAQ at 24.9% and the S&P at 25.0%. In 2023, the NASDAQ outperformed the S&P by 53.8%, whereas the S&P returned 26.3%.
The 2022 bear market revealed NASDAQ's vulnerability. The NASDAQ-100 dropped 33.0% while the S&P 500 fell only 18.1%. This 14.9 percentage-point gap indicates that tech-heavy indexes underperform in rising interest-rate environments.
Long-term compounding from 2007 to 2025 tells a compelling story. NASDAQ-100 achieved 16.0% CAGR with 1,342% cumulative return. S&P 500 delivered 11.1% CAGR with 560% cumulative return. NASDAQ-100 outperformed in 14 of 18 calendar years, representing a 78% win rate.
A $10,000 investment ten years ago would be worth approximately $50,000 to $60,000 in NASDAQ-100 versus $30,000 to $35,000 in S&P 500.
Major crises reveal crucial differences in drawdown severity. During the dot-com crash from 2000 to 2002, the NASDAQ-100 lost 82.9% while the S&P 500 dropped 49.1%. NASDAQ took roughly 15 years to recover. During the 2008 financial crisis, the NASDAQ-100 fell 53.5% while the S&P 500 dropped 56.8%. NASDAQ actually outperformed because it excluded the financial sector that caused the meltdown.
For Indian investors, rupee depreciation adds substantial returns. The USD has appreciated roughly 3-4% annually against INR historically. From October 2010 to October 2023, the S&P 500 delivered 280% returns in USD but 597% returns in INR.
Risk and volatility analysis shows apparent differences
Understanding risk metrics helps investors set appropriate expectations and avoid panic selling during inevitable drawdowns.
NASDAQ-100 carries a beta of 1.17, meaning it moves 17% more than the S&P 500 benchmark. Annualised volatility is approximately 17.9% for NASDAQ and 13.1% for S&P. Daily return correlation is 93%, indicating high correlation but differing magnitudes. Rolling volatility differential averages 2.7-2.8% higher for NASDAQ.
Risk-adjusted returns favour NASDAQ despite its higher volatility. The current Sharpe ratio is 0.71 for the NASDAQ-100 and 0.63 for the S&P 500. The 2023 Sharpe ratio showed QQQ at 2.35 versus SPY at 1.55.
Maximum drawdowns present the starkest comparison. The NASDAQ-100's worst-ever drawdown reached 82.9% during the dot-com crash. The S&P 500's worst decline was 56.8% during the 2008 financial crisis. The worst drawdowns in 2022 showed the NASDAQ at 33% versus the S&P at 25.4%.
Interest rate sensitivity accounts for the 2022 divergent performance. NASDAQ-100 companies are long-duration assets. Their valuations depend heavily on distant future earnings. When the Federal Reserve raised rates 11 times during 2022-2023, higher discount rates crushed tech valuations.
Dividend yields and current valuations
Current valuations are elevated relative to historical standards. Dividend yields remain near record lows, particularly for the NASDAQ-100.
QQQ tracking NASDAQ-100 offers a dividend yield of 0.45-0.51%. SPY tracking S&P 500 yields 1.05-1.07%. VOO yields slightly higher at 1.11%. The historical median yield on the S&P 500 is 2.875%, placing current yields near record lows.
Only 58 of 101 NASDAQ-100 stocks pay any dividend compared to the vast majority of S&P 500 constituents. However, share buybacks have become the dominant mechanism for shareholder returns. S&P 500 companies repurchased a record $1.1 trillion in 2025.
Current valuation metrics show premium pricing across both indexes. NASDAQ-100 trades at a trailing P/E of 32-38x while the S&P 500 trades at 29.5x. The S&P 500's historical average is approximately 17x, indicating that both indexes trade at significant premiums.
Current index levels as of February 2026 show the S&P 500 at approximately 6,890 to 6,900, while the NASDAQ Composite sits near 23,592. Analysts project S&P 500 earnings growth of 12-14.7% for the full year 2026.
Investment options available to Indian investors
Indian investors can access these indexes through direct U.S. or India-domiciled funds, each with distinct trade-offs.
For a comprehensive guide on investing in U.S. stocks through ETFs from India, explore our detailed breakdown of popular options like QQQ and VOO.
U.S. ETFs accessible via the LRS route include several low-cost options. VOO and IVV track the S&P 500 at just 0.03% expense ratio. SPY tracks the S&P 500 at 0.0945% but offers the best liquidity. QQQM tracks the NASDAQ-100 at 0.15% while QQQ charges 0.18% with the highest liquidity.
Indian mutual funds tracking the NASDAQ-100 include Motilal Oswal NASDAQ 100 FoF, with a 0.20% expense ratio and AUM of ₹6,159 crore. Kotak NASDAQ 100 FoF charges 0.24-0.55% with ₹3,770 crore AUM. Navi US NASDAQ 100 FoF charges 0.30% and has ₹1,071 crore in AUM.
Indian mutual funds tracking the S&P 500 include Motilal Oswal S&P 500 Index Fund, with a 0.63% expense ratio and ₹4,103 crore in AUM. Mirae Asset S&P 500 Top 50 ETF charges 0.60% with ₹1,008 crore AUM.
Direct U.S. ETFs are more cost-effective for investments above ₹20-30 lakh held long-term. For smaller amounts or SIP investors, Indian funds offer better convenience despite higher expense ratios.
SEBI regulatory constraints affect fund availability. The industry-wide overseas investment limit of $7 billion periodically causes fund closures. Always verify fund availability before investing.
Tax implications every Indian investor must understand
The 2024 Budget changes significantly altered international fund taxation. Understanding these rules is essential for optimising after-tax returns.
Capital gains taxation for FY 2025-26 treats holding periods differently. Gains on holdings held for up to 24 months are subject to slab-rate taxation at up to 30%, plus a surcharge. Gains on holdings exceeding 24 months face a flat 12.5% LTCG tax without indexation.
The ₹1.25 lakh LTCG exemption applies only to domestic equity funds with 65% or more Indian equity. International funds receive no exemption. Every rupee of LTCG gets taxed at 12.5%.
Dividend taxation entails a 25% U.S. withholding tax. Focus on the source, reduced from 30% under a DTAA. Investors must declare gross dividends in the Indian ITR and can claim Foreign Tax Credit via Form 67 to avoid double taxation.
Portfolio allocation strategies for different investor profiles
Optimal allocation depends on age, risk tolerance, portfolio size, and investment goals. The recommendedUS allocation within the total portfolio varies with portfolio size. For portfolios under ₹10-25 lakh, allocate 0-10% to U.S. markets. The U.S. prioritises the domestic market. For ₹25 lakh to ₹1 crore, allocate 10-20% for meaningful diversification. For portfolios exceeding ₹1 crore, allocate 15-20% for complete international diversification.
The allocation between the S&P 500 and the NASDAQ-100 in the U.S. portfolio depends on investor type. Conservative investors should allocate 100% to the S&P 500 with no NASDAQ exposure. Moderate investors should allocate 70% to the S&P and 30% to the NASDAQ for balanced growth. Aggressive investors can split 50-50 to achieve higher returns with greater volatility.
Age-based recommendations suggest that younger investors in their 20s-30s can use a 60:40 or 50:50 S&P-to-NASDAQ split. Investors in their 40s should shift to a 70:30 allocation favouring S&P. Investors in their 50s should use an 80:20 allocation. Retirees in their 60s should focus entirely on the S&P 500 for stability.
Warren Buffett recommends 90% of portfolios in a low-cost S&P 500 index fund for long-term wealth accumulation.
Learn the complete process of how to invest in the S&P 500 from India, including platforms, taxation, and step-by-step guidance.
For most Indian investors, allocating 15-20% of total equity to U.S. markets, with a 70:30 split between the S&P 500 and NASDAQ-100, provides optimal diversification. Use the Indian Fund of Funds for amounts under ₹30 lakh. Consider direct U.S. ETFs forU.S.arger portfolios. Hold for a minimum of 24 months to qualify for 12.5% LTCG treatment rather than slab-rate STCG.
The rupee's structural depreciation against the dollar means a U.S. index provides both market returns and currency gains. This combination makes a compelling case for Indian portfolios seeking genuine international diversification.
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.
Ready to earn on every trade?
Invest in 11,000+ US stocks & ETFs
