Exchange Traded Funds have grown tremendously in recent times, although they have been in India for over sixteen years now, with the first ETF, Nifty Bees listed in 2002. As the ETFs track benchmark Index, their price movements are expected to track these indices or any other assets they represent. Using the latest data from NSE, the relationship between prices of ETFs in India and those of their underlying assets of the previous two years using the econometric techniques of Vector Auto regression are studied. The paper also focuses on understanding tracking error across the cross-section of ETF's present in the Indian Markets. The key findings of the study are a lag of 2 days between the price change in index and ETFs. Further, the tracking error is significantly decreased when the number of days for rolling standard deviation are increased.

Keywords: Exchange Traded Funds, Vector Auto Regression (VAR), Vector Error Correction (VEC), Tracking Error, Stationarity, Correlation, Time Series Analysis.