Nippon India Nifty Auto ETF vs TATA NIFTY AUTO INDEX FUND

Nippon India Nifty Auto ETF and TATA Nifty Auto Index Fund are almost mirror images of each other, exhibiting a 99.88% overlap – ranking 638th out of 5000 fund pairs we’ve analysed. This isn’t surprising, as both are passively managed funds tracking the Nifty Auto index. The massive 76.65% sector overlap within Automobiles confirms the source of this near-total duplication.

The overlap is heavily driven by top holdings like Mahindra & Mahindra, Maruti Suzuki, and Bajaj Auto, where both funds maintain almost identical weights. Essentially, you’re getting the same portfolio, just packaged by different AMCs (Nippon and Tata). There are no significant holdings unique to either fund to offer any differentiation.

This extremely high overlap flags a serious diversification risk. Holding both funds doesn’t spread your investment; it simply doubles your exposure to the same 15 auto stocks. You aren’t gaining any benefit from diversification within the auto sector, and you’re certainly not diversifying across sectors.

For investors, this is a clear case of diminishing returns. Choose one fund based on factors like expense ratio or AMC preference, but avoid holding both. You’re paying fees for essentially the same investment strategy.