Nasdaq 100 as an Indian Mutual Fund Benchmark

The Nasdaq 100 (ticker symbol: NDX) is a modified market capitalisation-weighted index of the 100 largest non-financial companies listed on the Nasdaq Stock Market, covering primarily the technology, consumer discretionary, communication services, healthcare, and industrial sectors. Maintained by Nasdaq Inc. (now Nasdaq, Inc.), the index is heavily concentrated in US and global technology companies and represents the performance of the world’s most capitalised technology-driven businesses. For Indian mutual fund investors, the Nasdaq 100 – through its total return variant – serves as the benchmark for feeder funds and fund-of-funds (FoFs) that invest in US technology equities.

Publisher

Nasdaq, Inc. (formerly Nasdaq OMX Group) is an American multinational financial services company and the operator of the Nasdaq Stock Market, one of the world’s largest equity exchanges by market capitalisation. Nasdaq Inc. also operates as an index services business, maintaining the Nasdaq 100, Nasdaq Composite, Nasdaq-100 Technology Sector Index, and numerous custom indices. The Nasdaq 100 was introduced on 31 January 1985 with a base value of 250.

Index structure

Constituent selection

The Nasdaq 100 covers the 100 largest non-financial companies listed on the Nasdaq Stock Market by modified market capitalisation. Key selection criteria:

• Exchange: must be listed exclusively on the Nasdaq Stock Market (Nasdaq Global Select Market or Nasdaq Global Market).
• Sector exclusion: financial companies (banks, insurance, diversified financials) are excluded; this is a defining feature that distinguishes the Nasdaq 100 from the S&P 500, which includes financials.
• Market capitalisation: ranked by modified market cap; the top 100 qualifying companies are included.
• Liquidity: minimum average daily trading volume of 200,000 shares per day.
• Listing history: must have been listed on Nasdaq for a minimum of two years (exceptions made for large IPOs where market cap would make them eligible for top 25).
• ADRs: foreign companies listed as American Depositary Receipts (ADRs) on Nasdaq are eligible (e.g., ASML, Baidu historically, Mercadolibre).

Modified market cap weighting

The Nasdaq 100 uses a modified market capitalisation weighting system. Unlike pure free-float weighting, the modified system includes rebalancing rules to prevent individual stocks from exceeding specified concentration thresholds:

• Quarterly rebalancing: if a stock exceeds 24% of the index at rebalancing, or if the aggregate weight of stocks above 4.5% exceeds 48%, the index is rebalanced using a proportional reduction algorithm.
• This modification was introduced to prevent excessive concentration in dominant companies such as Apple, Microsoft, and Amazon.

Despite the rebalancing rules, the Nasdaq 100 is inherently more concentrated than the S&P 500 in the technology sector:

• Technology-dominant names: as of 2024-25, the top five companies (Microsoft, Apple, NVIDIA, Amazon, Meta) collectively account for approximately 40-45% of the index.
• Sector distribution: information technology + communication services collectively account for approximately 55-65% of the index.

Rebalancing frequency

Quarterly (March, June, September, December), with annual reconstitution in December to review and refresh constituents.

Non-financial focus: implications

The exclusion of financial companies from the Nasdaq 100 has several implications:

1. Higher growth orientation: financials are typically mature, low-growth businesses; their exclusion leaves the index with a higher aggregate revenue growth rate.
2. Higher P/E multiples: technology and growth companies carry higher price-to-earnings ratios, making the Nasdaq 100 trade at a premium to the S&P 500 on earnings multiples.
3. Higher volatility: technology stocks are more sensitive to interest rate changes (growth companies are valued on discounted future cash flows; higher discount rates reduce present values) and to sentiment shifts.
4. Cyclicality: the Nasdaq 100 has experienced sharper drawdowns in rising rate environments (2000-02, 2022) and sharper recoveries when rates fall or growth expectations revive.

TRI variant for Indian MF benchmarking

Indian mutual funds benchmarked against the Nasdaq 100 use the Nasdaq-100 Total Return Index, which assumes reinvestment of dividends. The Nasdaq 100 constituent companies pay relatively low dividends compared with the broad market (technology companies historically prefer buybacks), so the TRI-PRI gap is modest – approximately 0.5-0.8% per annum in recent years.

As with S&P 500 feeder funds, returns are presented in both USD and INR terms. Rupee depreciation adds approximately 3-4% per annum to the INR return over long periods.

Historical returns

Approximate Nasdaq 100 Total Return Index CAGR:

The Nasdaq 100 has significantly outperformed the S&P 500 over the past decade but with much greater volatility. The index fell approximately 32-33% in 2022 (the worst annual performance since 2008) due to the Federal Reserve’s aggressive rate hiking cycle, before recovering strongly in 2023-24.

Key constituents

As of 2024-25, the ten largest constituents and their approximate weights:

Indian mutual fund schemes benchmarked to Nasdaq 100

Several Indian AMCs offer Nasdaq 100 feeder funds and FoFs:

• Motilal Oswal Nasdaq 100 ETF and FOF: one of the first and largest; the ETF is listed on NSE.
• Mirae Asset NYSE FANG+ ETF FoF: tracks a related concentrated tech index (FANG+).
• ICICI Prudential Nasdaq 100 Index Fund FoF.
• Kotak Nasdaq 100 FoF.
• Aditya Birla Sun Life Nasdaq 100 FoF.
• Invesco India Nasdaq 100 FoF: invests in the offshore Invesco QQQ Trust ETF.

These funds were among the most popular international funds with Indian retail investors during 2020-22 before SEBI’s overseas investment limits were reached and new subscriptions were temporarily suspended.

Nasdaq 100 versus NIFTY IT TRI

Indian investors sometimes ask whether a Nasdaq 100 fund duplicates their existing exposure through Indian IT sector funds (NIFTY IT TRI). The two are related but distinct:

The two indices serve different purposes: the Nasdaq 100 gives access to US-domiciled technology product and platform companies, while the NIFTY IT TRI captures Indian IT services exporters.

Regulatory and tax context

The SEBI overseas investment limits (USD 7 billion industry aggregate for overseas ETFs, USD 1 billion per AMC) affect Nasdaq 100 feeder fund capacity. Tax treatment for FoFs investing in overseas funds follows the debt fund taxation rules (since these FoFs hold foreign fund units, not direct equities), making post-tax returns lower than the gross return in the hands of Indian retail investors.

See also

• S&P 500 (Indian MF benchmark use)
• MSCI World (Indian MF benchmark use)
• MSCI Emerging Markets Index
• NIFTY IT TRI
• Mutual fund
• AMFI

References

1. Nasdaq, Inc. “Nasdaq-100 Index Methodology.” nasdaq.com. Accessed 2026.
2. Nasdaq, Inc. “Nasdaq-100 Fact Sheet.” nasdaq.com. 2025.
3. SEBI. Overseas investment limits for mutual funds circular. sebi.gov.in. 2022.
4. AMFI. “Overseas FoF and feeder fund subscription data.” amfiindia.com. 2025.
5. S&P Dow Jones Indices. “S&P 500 vs Nasdaq 100 comparison data.” spglobal.com. 2025.