Motilal Oswal Nasdaq 100 ETF: Meaningful Choice for Geographical Diversification?

The US equity market, despite the protectionist policies under Trump 2.0, has posted decent returns.

The Nasdaq Composite Index - which is a widely followed index and weighted towards companies in the information technology domain - has clocked a decent 15.2% return this year as of 10 October 2025.

The Nasdaq 100 - representing the top 100 non-financial companies from the technology, healthcare, and consumer sectors - has delivered 15.5% returns this year as of 10 October 2025.

The Nasdaq also includes international companies, including some Indian ones. For example, Infosys' ADRs are listed on the Nasdaq. In the Nasdaq 100 index, almost 50% of constituent companies are from outside the US.

At present, investors are attracted to the boom in AI and AI-related stocks in the US, such as the magnificent seven - Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla, and others.

These companies, keeping in mind the role AI will play in the future, have increased their capital expenditure and done strategic deals have been struck between chipmakers and OpenAI.

Investors in India, not wanting to miss the bus, are looking west and considering some of the best international mutual funds for geographical diversification. Mutual funds investing in the Nasdaq are getting the attention. One such fund is the Motilal Oswal Nasdaq 100 ETF.

In this editorial, we will deep-dive into Motilal Oswal Nasdaq 100 ETF...

Fund Overview

This scheme was launched in March 2011 and is India's first US equities-based Exchange Traded Fund (ETF), tracking the Nasdaq 100 Index. It invests 95-100% of its total assets in securities constituting the Nasdaq 100 - Total Return Index (TRI).

For liquidity purposes, up to 5% of its total assets may be invested in the overseas debt & money market instruments and cash at call, mutual fund schemes or exchange traded funds based on Nasdaq 100 - TRI.

The fund engages in securities/stock lending as well as equity derivatives for non-hedging purposes.

However, the fund does not indulge in:

• Short selling
• Unlisted security of an associate or group company of the sponsor, or any security issued by way of private placement by an associate or group company of the sponsor
• Listed securities of group companies of the sponsor which exceeds 25% of the net assets
• Securitised debt
• AT1 and AT2 bonds
• Repo in corporate debt and corporate reverse repo rate
• Unrated debt instruments and Credit Default Swaps (CDS)
• Structured Obligations (SOs) / Credit Enhancements (CEs)
• Units of Real Estate Investment Trusts (REITs) & Infrastructure Investment Trusts (InvITs)

The Assets Under Management (AUM) of the fund has increased over the years, but sharply since covid. Today, as per its September 2025 portfolio, the fund's AUM is over Rs 108 bn.

The fund has been managed by been by Sunil Sawant since July 2014. Before that, Ankush Sood managed the fund.

Motilal Oswal Nasdaq 100 ETF - Snapshot

Source: ACE MF

Investment Strategy

Being an ETF primarily investing in securities constituting the Nasdaq 100 - TRI, the fund follows a passive investment strategy. This means, its portfolio replicates the Nasdaq 100 - TRI in the same proportion as in the index.

The investments in Nasdaq 100 constituents are in US dollar equivalent to the amount received in Indian rupees by the fund.

As per the capital market circular dated 27 June 2024, which is currently in force, the limit for overseas investment is subject to a maximum of US$ 1 bn per mutual fund. As and when this limit is revised or modified, the fund shall adopt such new limits.

As regards making investment in debt & money market instruments (including those overseas), the current limit of US$ 1 bn per mutual fund applies.

When investing in overseas mutual fund schemes, including ETFs which are based on the Nasdaq 100 Index, as per regulator's circular the limits for overseas investment is subject to a maximum of US$ 600 million (m) per mutual fund.

The limits for investments in overseas ETFs that invest in securities, is subject to a maximum of US$ 200 m per mutual fund, within the overall industry limit of US$ 1 bn.

The fund uses an investment approach designed to track the performance of the Nasdaq 100 - TRI. Hence, this index is the primary benchmark, while the Nifty 50 - TRI is the secondary benchmark.

Portfolio

As per the September 2025 portfolio, the fund has 99.5% of its assets in overseas equities and includes names such as NVIDIA, Microsoft, Apple, Broadcom Corp, Amazon, Tesla, etc.

The top 10 stocks in the underlying portfolio comprise 52.9% of the portfolio. Many of these are the FAANG and are involved in AI.

The portfolio is well-distributed across industries, such as semiconductors, system software, interactive media services, technology hardware, storage & peripherals, application software, broadline retail, auto manufacturers, etc.

The top 3 sectors comprise 19.7% of the total assets and include consumer durables (19.7%), IT (17.5%), and others (11.2%).

The fund replicates the securities in the Nasdaq 100 - TRI, and hence, the portfolio turnover is subject to rebalancing due to changes in the composition of its index or due to corporate actions of the securities constituting the index.

Theoretically, the corpus of the scheme will be fully invested in the securities comprising the underlying Index in the same proportion of weightage as the securities have in the underlying Index. Thus, under normal circumstances, the fund aims to maintain a tracking error not exceeding 2%.

Historical Returns

In the last one year, the fund has clocked a return of 24.7% versus 8.9% by the Nifty 50 - TRI.

The 3-year and 5-year compounded annualised rolling returns clocked by the fund are 20.9% and 21.9%, respectively, versus the Nifty 50 - TRI, which clocked around 13.5% and 18.6% in these respective time periods.

Risk Profile

The fund to clock longer returns has exposed its investors to high risk (Standard Deviation of 18.29) than the Nifty 50 - TRI (the secondary benchmark).

But with its fortunes linked to the Nasdaq 100 - TRI, which has done well in the last couple of years, the risk-adjusted returns (sharpe and sortino ratios of 0.40 and 0.75, respectively) of the fund are also attractive.

In other words, the fund has decently compensated its investors for the risk taken.

Conclusion

The fortunes of Motilal Oswal Nasdaq 100 ETF is closely linked to its underlying Nasdaq 100 -TRI. Both the scheme and its benchmark command a very high risk.

The protectionist policies of US President Donald Trump, particularly tariffs, are something to watch out for.

Another influencing factor will be the US dollar, which has shown significant weakness this year and turned the spotlight on gold and silver.

The trailing PE and forward PE of the Nasdaq 100 index after a fast run-up are at 35 and 23, respectively, which is at a premium, not offering enough margin of safety.

You may need to consider your risk appetite and investment horizon before investing, even when seeking geographical diversification.

Be a thoughtful investor.

Happy investing.

Disclaimer: This write-up is for information purposes and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully. Registration granted by SEBI, enlistment as IA with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.