NFO Pick – (DSP MSCI India ETF)

11 Nov 2025 , 02:10 PM

UNDERSTANDING THE MSCI INDIA INDEX

The MSCI India Index tracks a portfolio of large cap and mid-cap stocks in India and covers 75% of the NSE market cap in free float terms. MSCI India Index comprises of 160 companies, of which 92 are large caps and 68 are mid-caps. Its free float definition for weighting is based on the foreign inclusion factor (FIF). The DSP MSCI India Fund will create a portfolio that exactly mirrors the MSCI India Index in terms of portfolio composition and the ratio of each stock in the portfolio. It is the general benchmark for global investors looing to Invest in a dedicated and broad-based India portfolio.

WHY INVEST IN THE DSP MSCI INDIA ETF

There are several advantages of investing in the DSP MSCI India ETF at the current juncture.

• FPI share in Indian equities has fallen from 20.1% in August 2020 to 15.8% in August 2025, due to heavy selling by FPIs. However, this also offers an opportunity as India is the fastest growing large economy and FPI flows are likely to gravitate back.
• For NRIs and offshore investors, holding the DSP MSCI Index ETF may be more tax efficient than buying MSCI India ETF listed elsewhere. ETF dividends are not subject to tax and any rebalancing by the fund is also tax neutral for the investor.
• The MSCI India Index has a lower large cap concentration compared to Nifty. While the top 10 in Nifty has a combined weightage of 53.0% in the index, the same weight of the top 10 in the MSCI India index is just 37.7%. That makes it more widely spread out.
• MSCI India index has a low overlap of just 69% with the Nifty and 64% with the Nifty LargeMid 250 Index. This makes the DSP MSCI Index ETF a good diversification bet to reduce risk of your existing portfolio.
• Over the last 27 years, the MSCI India index has given CAGR returns of 14%, which makes it a very attractive index to benchmark to. The CAGR returns are stable over different time periods, which makes it more predictable.

The risk is that drawdowns have been fairly sharp in the MSCI India Index; at times sharper than the Nifty 50 index.

HOW NIFTY AND MSCI ETFS PERFORMED

Since DSP MSCI India ETF is a passive fund benchmarked to the MSCI India Index, we have considered a population of MSCI Index ETFs and Nifty ETFs to benchmark. The basic premise is 5 years of existence to be considered in the rankings. There are 15 such Funds in India, managing total AUM of ₹3,26,374 Crore; largely dominated by SBI Nifty ETF, UTI Nifty ETF and Pru ICICI Nifty ETF. Of these, only 9 funds have a 5-year track record. Here are Top-9 Funds on 5-year returns (Direct Plans).

MSCI & Nifty ETFs Scheme Name	Return (%) 1-Year	Return (%) 3-Years	Return (%) 5-Years	Daily AUM (₹ in Crore)
ICICI Prudential Nifty 50 ETF	5.44	13.29	17.10	34,783.41
Aditya Birla Sun Life Nifty 50 ETF	5.42	13.27	17.08	3,193.36
UTI Nifty 50 ETF	5.42	13.27	17.07	67,105.33
HDFC Nifty 50 ETF	5.41	13.26	17.07	4,932.88
SBI Nifty 50 ETF	5.41	13.26	17.06	2,10,927.77
Quantum Nifty 50 ETF	5.31	13.19	17.01	76.05
Kotak Nifty 50 ETF	5.41	13.22	17.00	3,203.20
LIC MF Nifty 50 ETF	5.40	13.18	16.99	895.31
Bandhan Nifty 50 ETF	5.38	13.23	16.90	22.17
Data Source: AMFI

 

The table above captures the best performing MSCI and Nifty ETFs in India in terms of 5-year CAGR returns. If we look at 1-year returns, the average returns are at 5.40%, with fairly low dispersion in returns. Over a 3-year period, the average returns of these index funds stand at 13.24%, again, with a very low dispersion in returns. Index Funds have given impressive returns over 5-years at 17.03% CAGR, although this could be influenced by the COVID base. Even the dispersion is very low, as expected of an index fund, over 5-years.

GLANCE AT DSP MSCI INDIA ETF

Here are key details of the DSP MSCI India ETF.

• NFO opens on November 10, 2025 and closes on November 17, 2025. It is an open-ended passive ETF, which will replicate the MSCI India Index TRI (total returns index). The ETF will be subject to the risk of tracking error.
• On the risk-o-meter, DSP MSCI India ETF is classified as “Very High Risk,” due to its substantial exposure to equities in general, the current valuations of index stocks, and the risk of tracking error in passive funds.
• DSP MSCI India ETF is best suited to investors looking at riding the India macro story with a mix of large cap and mid-cap stocks in a single index, that is globally accepted.
• Being an index ETF, there will be no exit load on redemptions. However, investors are suggested to stay invested for 5-7 years or longer to get the full benefits of passive investing. The expense ratio of the fund will be capped at 0.3%, being an ETF.
• Minimum application amount in NFO is ₹5,000 and in multiples of thereof. This applies to switch-ins also. Investors can look to create SIP structures to get the best benefits of rupee cost averaging.
• It will offer Regular Plans and Direct plans to investors. However, being an index fund, it will only offer the growth plan to investors in the ETF.
• Anil Ghelani and Dipesh Shah will be the dedicated fund managers for the scheme. The fund will invest its corpus predominantly in creating a portfolio mix that replicates the MSCI India index in terms of portfolio composition.

DSP MSCI India ETF will be treated as an equity fund for tax purposes. Dividends will be taxed at the incremental rate of tax applicable to the investor. Short term capital gains – STCG (held for up to 12 months) will be taxed at 20.8% (including 4% cess). Long term capital Gains – LTCG (held for beyond 12 months), will be taxed at 12.5% after factoring in a base annual exemption limit of ₹1,25,000. There will be no indexation benefits available!