Motilal Oswal BSE 1000 Index Fund NFO: Should you invest?

Motilal Oswal has launched India’s first index fund tracking the BSE 1000 Total Return Index (TRI). This new offering aims to give investors one-stop access to the entire listed equity market, spanning everything from blue-chip large caps to tiny micro caps. The New Fund Offer (NFO) opened for subscription on June 5, 2025, and will close on June 19, 2025.

Motilal Oswal BSE 1000 Index Fund NFO snapshot

What makes BSE 1000 TRI different?

The BSE 1000 TRI is designed to capture the performance of the top 1,000 listed companies in India, covering about 94 per cent of the country’s total listed market capitalisation. That makes it the most expansive passive index currently available.

Unlike narrow benchmarks such as the Nifty 50 or even the Nifty 500, the BSE 1000 reaches deeper into the market—investing in micro-cap companies as well. Micro caps refer to the smallest listed companies by market cap, often under-researched and less liquid, but with high growth potential and volatility. In this index, they occupy the 501st to 1000th rank.

The index is rebalanced semi-annually and uses free-float market cap weighting to ensure investability and liquidity.

However, while the index will invest in more companies, the actual weightings reveal a familiar story. The index seems to be large-cap heavy.

So, while the index does extend into micro caps, their influence on overall returns is limited. In fact, the bottom 100 of the index constituents depict only 0.25 per cent of its weightage. In other words, the fund continues to be dominated by large-cap names that drive most broad-based indices.

Sector and stock exposure: Little deviation

Although this new fund will invest in 1,000 stocks, the sectoral composition looks strikingly similar to the Nifty 500 and Nifty Total Market indices.

And when it comes to top holdings, there’s hardly any surprise.

The top 10 stocks together make up around 32 per cent of the portfolio, reiterating the dominance of large caps.

Liquidity

Despite the micro-cap inclusion, liquidity doesn’t seem to be a major concern. According to the fund presentation, the average daily trading volume for the micro-cap segment alone is Rs 5,900 crore, which is sufficient to support a fund size of Rs 5,000 crore.

However, due to the large number of stocks and execution complexity, tracking error may be higher than typical large-cap index funds.

Performance

While long-term numbers are healthy, they don’t show significant outperformance over existing total-market indices.

Returns are neck and neck. The extra micro-cap tail has not made a noticeable difference—at least so far.

Should you invest?

The Motilal Oswal BSE 1000 Index Fund offers the broadest coverage of India’s equity market in a single passive fund. But beyond the marketing pitch, its actual behaviour is likely to remain similar to BSE 500 index funds already available.

For investors already holding the BSE 500, this new fund doesn’t bring compelling additional diversification. Don’t expect a dramatic shift in performance because of the 1,000-label. In substance, this fund walks the same path as its older, narrower cousins.

Also read: Is it wise to invest in an NFO?