A normal index fund weights each company by its market value. A smart beta, or factor, ETF follows a published rulebook that picks and weights stocks by a trait instead, such as low volatility, momentum, quality or value. There is no fund manager making calls; the rules do the choosing. This guide explains how the main Indian factor indices work and how they have done, with data to September 2026.
The Main Factors and Their NSE Indices
| Factor | What the index selects | Index | Rebalanced |
|---|---|---|---|
| Low volatility | The 30 Nifty 100 stocks with the lowest price volatility over the past year, with steadier stocks given more weight | Nifty100 Low Volatility 30 | Quarterly |
| Momentum | Stocks with the strongest 6-month and 12-month returns, adjusted for how volatile they were | Nifty200 Momentum 30; Nifty Midcap150 Momentum 50 | Every six months |
| Quality | High return on equity, low debt (not applied to financial firms) and steady earnings growth over five years | Nifty200 Quality 30; Nifty Midcap150 Quality 50 | Every six months |
| Value | Cheap stocks on earnings, book value, sales and dividend yield relative to price | Nifty50 Value 20; Nifty500 Value 50 | Every six months |
| Alpha | The 50 stocks with the highest one-year alpha (return beyond what their market risk explains) from the top 300 NSE stocks | Nifty Alpha 50 | Quarterly |
| Equal weight | Every stock in the parent index gets the same weight | Nifty50 Equal Weight; Nifty100 Equal Weight | Weights reset quarterly |
Source: NSE Indices, Methodology Document for Equity Indices, September 2026, and index factsheets, 31 August 2026. NSE also runs a combined Nifty Alpha Low-Volatility 30 index, rebalanced every six months.
What They Cost
Factor ETFs cost more than plain index ETFs, and the range is wide. As of 28 September 2026 (sharpely.in data):
- Large Nifty 50 ETFs: 0.03–0.05% a year.
- Factor ETFs: about 0.2% to 1.1%. Quality ETFs charge 0.32–0.36%, low-volatility ETFs 0.19–0.48% and Nifty50 Value 20 ETFs 0.20–0.47%. Most Nifty200 Momentum 30 ETFs charge 0.74–0.93%; HDFC's is the exception at 0.30%.
- Active large-cap funds (direct plans): about 0.63–1.04%.
So a factor ETF can cost 5 to 25 times a large Nifty 50 ETF. A momentum ETF at 0.75–0.93% costs about as much as an active large-cap fund.
| ETF | NSE symbol | Expense ratio | AUM (₹ Cr) | Tracking error |
|---|---|---|---|---|
| ICICI Prudential Nifty 100 Low Vol 30 ETF | LOWVOLIETF | 0.48% | 3,414 | 0.04% |
| ICICI Prudential Nifty Alpha Low-Vol 30 ETF | ALPL30IETF | 0.60% | 1,582 | 0.14% |
| DSP Nifty 50 Equal Weight ETF | EQUAL50ADD | 0.23% | 1,390 | 0.08% |
| Kotak Nifty Alpha 50 ETF | ALPHA | 0.51% | 934 | 0.17% |
| ICICI Prudential Nifty 200 Momentum 30 ETF | MOM30IETF | 0.76% | 557 | 0.25% |
| ICICI Prudential Nifty50 Value 20 ETF | NV20IETF | 0.46% | 175 | 0.10% |
| ICICI Prudential Nifty 200 Quality 30 ETF | QUAL30IETF | 0.36% | 142 | 0.04% |
Source: sharpely.in scheme pages, 28 September 2026. AUM is the latest figure shown there (sharpely does not print its date). Tracking error is sharpely's computed figure.
The category is still small. The 49 factor ETFs listed on sharpely held about ₹13,400 crore in total in September 2026. Including index funds, passive smart beta funds held about ₹33,870 crore in March 2025 (ICRA data cited by NJ AMC). Many individual factor ETFs hold under ₹50 crore and trade thinly.
How the Factor Indices Have Performed
| Index | 1 year | 5 years (a year) | 5-year volatility |
|---|---|---|---|
| Nifty 50 | −0.35% | 8.32% | 13.81% |
| Nifty200 Momentum 30 | 6.38% | 11.02% | 19.46% |
| Nifty200 Quality 30 | 2.51% | 8.88% | 13.54% |
| Nifty100 Low Volatility 30 | 0.92% | 10.47% | 11.94% |
| Nifty Alpha 50 | 17.72% | 14.49% | 21.67% |
| Nifty50 Value 20 | −4.04% | 8.18% | 13.94% |
| Nifty500 Value 50 | 19.61% | 25.84% | 20.11% |
| Nifty50 Equal Weight | 7.10% | 12.97% | 13.93% |
Total return, to 31 August 2026, from NSE Indices factsheets. Volatility is annualised standard deviation of the price index. These are index returns; an ETF trails its index by its costs.
Over longer periods the gaps look bigger, but much of that history is back-tested: NSE calculated how the rules would have done before the index existed. Low Volatility 30 launched in 2016, Quality 30 in 2018 and Momentum 30 in 2020.
- Momentum: over 15 years to February 2026, Nifty200 Momentum 30 returned 18.86% a year against 12.99% for the Nifty 200 (NSE).
- Quality: about 17% a year against about 12% for the Nifty 50 from 2006 to mid-2022 (Aditya Birla Sun Life, Bloomberg data). Over the five years to August 2026 its lead was only 0.56 points a year.
- Low volatility: beat the Nifty 50 by about 3.2 points a year over 15 years to December 2024, with lower volatility (Mirae Asset, NSE data).
- Value: the broad Nifty500 Value 50 did very well over five years; the narrow Nifty50 Value 20 roughly matched the Nifty 50.
Over the most recent five years, the leads have been smaller than the long back-tests suggest: about 2.7 points a year for momentum, 2.2 for low volatility and 0.6 for quality against the Nifty 50.
Every Factor Has Bad Years
| Year | What happened |
|---|---|
| 2018 | Nifty Midcap150 Momentum 50 fell 17%. Nifty200 Momentum 30 fell 1.7% while the Nifty 50 TRI rose 4.6%. |
| 2020 | Low volatility beat the market: Nifty100 Low Vol 30 +24.3% vs Nifty 50 +16.1%. |
| 2021 | Low volatility lagged slightly: +24.2% vs +25.6%. |
| 2022 | Nifty200 Momentum 30 trailed the Nifty 200 by about 10 points. |
| 2025 | Nifty200 Momentum 30 fell 4.6% and trailed the Nifty 200 by about 14 points. |
Calendar-year total returns. Sources: NSE momentum whitepaper (data to 27 February 2026); Mirae Asset low volatility note (NSE TRI data to 31 December 2024).
Low volatility's main selling point is shallower falls. In 2020 its largest fall was 30.6% against 37.9% for the Nifty 100, and in 2008 48.7% against 61.1%. That is roughly a fifth smaller, not a fraction of the market's fall.
How Factor ETFs Are Taxed
Indian factor ETFs hold Indian shares, so they are taxed as equity. For units sold from 1 April 2025 (rules carried into the Income-tax Act, 2025):
- Held 12 months or less: 20%.
- Held more than 12 months: 12.5% on gains above ₹1.25 lakh a year.
- STT: 0.001%, charged only when you sell.
International funds are no longer taxed at slab rate however long you hold them. A listed international ETF held more than 12 months, or an international fund of funds held more than 24 months, pays 12.5%, though without the ₹1.25 lakh exemption. So Indian factor ETFs keep a tax edge, but a smaller one than older articles suggest.
Where They Can Fit, and the Risks
- As a small add-on to a core index fund, if you want a specific tilt and understand it can trail the market for years.
- As a cheaper rules-based alternative to an active fund: quality and low-volatility ETFs cost about a third of a typical active large-cap fund. Momentum ETFs do not.
- Concentration: 30 stocks instead of 50, and sector tilts. On 31 August 2026 the Nifty200 Quality 30 had 25% in IT and 24% in FMCG.
- Turnover: frequent rebalancing raises trading costs, which shows up as a wider gap to the index.
- Liquidity: small ETFs can have wide bid-ask spreads. Check the price against the iNAV before buying.
- Chasing: buying a factor after a strong year is how many investors end up with its bad years instead.
For how factor ETFs sit alongside other equity ETFs, see equity ETFs beyond Nifty 50. To compare an ETF with an index fund on total cost, try our ETF vs index fund calculator.
This guide explains how these ETFs work and compare. It is not a recommendation to buy any specific fund.