Nippon India IT ETF Leads 3-Month Returns; PSU Banks Strong

The Nippon India ETF Nifty IT recorded an 11.8% return for the three months ending August 17, 2026. This performance positioned it as the top performer among index-based exchange-traded funds with assets under management exceeding ₹1,500 crore.

While IT funds showed renewed interest, the Nippon India ETF Nifty PSU Bank BeES demonstrated significant longer-term consistency. This fund, holding approximately ₹4,079 crore in assets as of July 2026, delivered robust returns over extended periods.

• Nippon India ETF Nifty PSU Bank BeES 1-year return: 24.0%
• Nippon India ETF Nifty PSU Bank BeES 3-year return: 24.0%
• Fund AUM (July 2026): ₹4,079 crore

Tracking Discrepancies Emerge

Investors must scrutinize how closely these funds track their intended underlying benchmarks. The Nippon India ETF Nifty IT has notably displayed a tracking error, indicating a divergence from its benchmark index performance.

• Nippon India ETF Nifty IT 1-year tracking error: 9.5 percentage points (trailing benchmark)
• Nippon India ETF Nifty IT 3-year tracking error: 7.5 percentage points (trailing benchmark)

Inherent Sectoral Vulnerabilities

Sector-specific ETFs inherently carry heightened risks due to their concentrated exposure to a single industry. This lack of broad diversification makes them susceptible to industry-specific headwinds.

• IT-focused ETFs: Vulnerable to global spending cuts and margin pressures.
• PSU bank funds: Sensitive to government policy, interest rate cycles, and credit growth.

When evaluating these investment vehicles, investors should look beyond recent returns alone. Key factors such as the expense ratio and the consistency of the tracking error over time are crucial for aligning with a broader investment strategy.