The Nippon India ETF Nifty IT delivered 11.8% returns over the past three months, emerging as a top performer among major index ETFs. While short-term gains are notable, investors should consider that the fund has historically trailed its benchmark index. Meanwhile, PSU bank-focused ETFs, such as the Nippon India ETF Nifty PSU Bank BeES, have demonstrated consistent strength with 24% returns over longer one- and three-year periods.
Nippon India ETF Nifty IT recorded an 11.8% return for the three months ending August 17, 2026, positioning it as the top performer among index-based exchange-traded funds with assets under management exceeding ₹1,500 crore. This surge highlights a period of renewed momentum for IT-focused funds.
While the short-term performance of the IT ETF is significant, it is equally important for investors to look at longer time horizons. Data shows a different trend when moving beyond the three-month window. For instance, the Nippon India ETF Nifty PSU Bank BeES, which held an asset base of approximately ₹4,079 crore as of July 2026, has delivered a robust 24.0% return over both one-year and three-year periods. This performance gap underscores why evaluating a fund’s consistency is vital for long-term planning.
Investors must also pay attention to how closely these funds mirror their underlying benchmarks. The Nippon India ETF Nifty IT has faced challenges in this area, trailing its benchmark index by 9.5 percentage points over the past year and 7.5 percentage points over the last three years. This difference is known as tracking error. When an ETF does not closely follow the index it is supposed to track, it can create a gap between the returns investors expect and what they actually receive.
Sector-specific ETFs like these come with inherent risks. Because they are focused on a single industry—such as IT or PSU banks—they do not offer the safety of a diversified portfolio that invests across different business sectors. If the IT sector faces headwinds, such as global spending cuts or margin pressure, an IT-focused ETF will feel the full impact. Conversely, PSU bank funds are highly sensitive to government policy, interest rate cycles, and credit growth trends.
When evaluating these instruments, investors should prioritize monitoring factors beyond just recent returns. Key metrics to track include the expense ratio, which affects net returns, and the consistency of the tracking error over time. Ensuring that a sectoral ETF effectively mirrors its benchmark is essential before deciding if it fits into a broader investment strategy.