Nippon India Nifty Auto vs Nippon India Nifty Auto ETF

These two Nippon India funds – the Nifty Auto ETF and the Nifty Auto direct plan – are almost mirror images of each other, registering a very high 99.7% overlap (ranked 1149 out of 5000 fund pairs). This isn’t surprising, as both aim to replicate the Nifty Auto index. The dominant driver of this overlap is a massive concentration in the Automobiles sector, accounting for 76.5% of the shared portfolio.

The biggest contributors to this near-total overlap are large holdings in Mahindra & Mahindra, Maruti Suzuki, and Bajaj Auto – their weights are virtually identical across both funds. Essentially, you’re getting the same portfolio composition with both options. There are no significant unique holdings in either fund to differentiate their approaches.

However, this extreme similarity isn’t necessarily a good thing. Such high overlap means you’re not achieving any real diversification benefit by holding both. You’re exposed to the same sector risks and stock-specific events twice over. While convenient, it doesn’t add value to your portfolio.

As an investor, understand you’re choosing between two ways to access the same underlying index. Consider why you’d hold both – the difference likely boils down to expense ratios and trading preferences. Don’t mistake holding both for diversification; it’s simply doubling down on the same bet.