Nasdaq 100 vs S&P 500 Index Funds in India (2026): Which US Index Should Your SIP Track?

By Nitish Bharadwaj · Published Sep 18, 2026 · 6 min

The Nasdaq 100 tracks 100 of the largest non-financial Nasdaq-listed companies, over half concentrated in technology; the S&P 500 spans 500 companies across every major US sector, making it the more diversified pick. Both are sold in India only as fund-of-funds routed through RBI's $7 billion overseas mutual fund cap, which has stayed exhausted since 2024 — so Motilal Oswal's versions have stopped new SIPs while Kotak, Navi, and ICICI Prudential's remain open. Gains held over 24 months are now taxed at a flat 12.5%, not your slab rate, since FY 2025-26.

A Nasdaq 100 fund and an S&P 500 fund both get sold as 'exposure to the US market' — but one of them can be up 8% while the other is flat in the same quarter, because they're tracking genuinely different slices of it. In 2026, picking between them also means checking which fund is actually open for new money, since an RBI cap on overseas mutual fund investment has kept several of the biggest ones shut to fresh SIPs for over a year. Here's what each index actually holds, which funds you can still buy, and how the tax rules changed this financial year.

What Each Index Actually Holds

The S&P 500 tracks 500 large-cap US companies spread across all eleven major sectors — technology, financials, healthcare, energy, industrials, and more — which is what makes it the closest thing to a single-fund bet on the entire US economy. The Nasdaq 100 tracks the 100 largest non-financial companies listed on the Nasdaq exchange, and because Nasdaq is where most US technology and internet companies list, the index ends up with well over half its weight in technology and a handful of mega-cap names — Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Broadcom typically account for a large share of the total index value between them.

How You Actually Buy Either One From India

Retail investors don't buy the underlying US index fund or ETF directly through an Indian mutual fund platform. Instead, Indian AMCs run a fund-of-funds (FoF) structure — your money buys units of an Indian scheme, which in turn invests almost entirely in a US-listed ETF that tracks the Nasdaq 100 or S&P 500. This avoids the paperwork of opening a US brokerage account or using the RBI's Liberalised Remittance Scheme yourself, but it also means your investment is subject to a regulatory ceiling that has nothing to do with how much you personally want to invest.

Why Some of These Funds Have Stopped Taking New Money

India's mutual fund industry operates under a $7 billion aggregate cap on overseas investment set by RBI in 2008, plus a separate $1 billion sub-limit specifically for overseas ETFs that got exhausted in April 2024. Both ceilings have stayed effectively full since, which means AMCs can't always accept fresh lumpsum or SIP money into their international FoFs even when investor demand is there — each fund house manages the limit for its own schemes, so some AMCs have paused new investments while others, with more headroom left, haven't.

The Tax Rule That Changed for FY 2025-26

Between FY 2023-24 and FY 2024-25, these international FoFs were caught by Section 50AA's original definition of a 'specified mutual fund' — any scheme investing 35% or less of its money in Indian equities — which forced every gain, regardless of how long the units were held, to be taxed as short-term capital gains at the investor's slab rate, with no indexation benefit at all. The Finance (No. 2) Act, 2024 narrowed that definition from FY 2025-26 onwards to cover only debt-oriented funds investing 65% or more in debt and money market instruments. Since a Nasdaq 100 or S&P 500 FoF holds neither Indian equity nor debt in that sense, it now falls outside Section 50AA entirely, and reverts to the same holding-period rule as other non-equity-oriented fund units: units held for more than 24 months qualify for long-term capital gains, taxed at a flat 12.5% without indexation; units sold within 24 months are taxed as short-term capital gains at the investor's income tax slab rate.

Nasdaq 100 or S&P 500 — Which Should You Pick

The choice comes down to how much sector concentration you're comfortable adding on top of what you already hold. If your Indian portfolio is already heavy on large-cap technology and internet-adjacent stocks through domestic funds, a Nasdaq 100 allocation compounds that same bet rather than diversifying away from it — our best large cap mutual funds guide covers what a typical large-cap Indian portfolio already leans toward. The S&P 500 gives genuine sector diversification within the US market itself, at the cost of a lower historical weight in the handful of mega-cap tech names that have driven much of the index's recent returns. Either way, returns in rupee terms also carry a currency component: a weaker rupee against the dollar adds to your reported gain, and a stronger rupee subtracts from it, on top of whatever the underlying US index itself does.

Neither fund should replace a core Indian equity allocation — they work as a satellite exposure layered on top of one, sized to a portion of the portfolio you're comfortable seeing move independently of the Nifty or Sensex. For a broader look at routes into US markets beyond just these two indices, our international mutual funds guide covers the other options, and our direct vs regular mutual fund plan guide covers how much a direct plan saves on the same FoF over a long holding period.