Best AI ETFs to Consider for Investment

The Indian stock market, represented by Nifty 50, has risen by nearly 13% (as of December 12, 2024). However, the U.S. market, particularly the NASDAQ index, has surged by approximately 33% over the same period.

While this does not imply abandoning Indian investments, diversifying into the U.S. market can be beneficial for two key reasons:

• Dollar Hedge: The Indian Rupee has consistently depreciated against the U.S. Dollar over the last decade, increasing returns for Indian investors in U.S. assets.
• Diversification: NASDAQ 100 has a low correlation (24.1%) with Nifty 50, making it a strong diversification tool.

Comparing Key Indices

Index	Companies Covered	Growth in Last 10 Years
Nifty 50	Top 50 Indian stocks	200%
NASDAQ Composite	2,500 U.S. companies	360%
NASDAQ 100	Top 100 U.S. tech-heavy stocks	400%

Sector Allocation: NASDAQ vs. Nifty 50

Sector	NASDAQ 100 (%)	NASDAQ Composite (%)	Nifty 50 (%)
Technology	59	60	13
Consumer Discretionary	18.3	17.7	–
Financials	0	3.4	34
Energy	–	–	10

Top Companies in NASDAQ 100

Company	Allocation (%)
Apple	9.0
Microsoft	8.0
Nvidia	7.6
Amazon	5.5
Tesla	3.8

Investment Options: India vs. U.S. ETFs

Investors looking to gain exposure to NASDAQ 100 can choose between:

1. India-Based ETF: Motilal Oswal NASDAQ 100 ETF

• Traded on: Indian Stock Exchanges
• Expense Ratio: 0.58%
• 1-Year Return: 37.2% (vs. NASDAQ 100 return of 38.4%)
• Tracking Error: ~1% below NASDAQ 100 due to time zone differences and execution delays
• Liquidity: Moderate, ~500,000-1 million shares traded daily

2. U.S.-Based ETF: Invesco QQQ Trust Series 1 (Ticker: QQQ)

• Traded on: U.S. Stock Exchanges
• Expense Ratio: 0.20%
• 1-Year Return: 37.2%
• Tracking Error: Minimal (~0.2%)
• Liquidity: High, ~23-32 million shares traded daily

Choosing Between Indian and U.S. ETFs

Feature	Motilal Oswal NASDAQ 100 ETF	Invesco QQQ (QQQ)
Exchange	Indian NSE/BSE	U.S. NASDAQ
Expense Ratio	0.58%	0.20%
Tracking Error	1%	0.2%
Liquidity	Moderate	High
Ease of Investing	Easy	Requires U.S. brokerage account

Key Takeaways

• Indian investors benefit from rupee depreciation when investing in U.S. ETFs.
• NASDAQ 100 offers high exposure to technology and consumer discretionary sectors.
• Invesco QQQ has lower expenses and tracking error compared to Indian ETFs but requires an international brokerage.
• Motilal Oswal NASDAQ 100 ETF is easier for Indian investors but may underperform slightly due to tracking error and higher costs.

When to Invest?

• The NASDAQ 100 P/E ratio is currently at 37.3, above its 10-year average (20-30 range). This suggests a potentially overvalued market.
• Investors should track valuations before entering and consider systematic investing (SIP) in ETFs for risk mitigation.