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Index funds are a good passive way to invest in the stock markets. The cost associated with them is minimal and they mirror the returns of the index that they underlie – NIFTY, Sensex, etc. One of the biggest advantages of investing in these is that they are free from the biases of fund managers as they are not actively managed by them but are imitations of the actual indices.
These funds are suitable for people who want to buy and hold for the long term of about five years or more.
Here’s a list of the top index funds to consider in India.
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Top Index Funds in India
While the list is not exhaustive, we have tried to include a variety of funds in terms of indices tracked and mimicked.
- Motilal Oswal Nasdaq 100 FOF Scheme
- Bandhan Nifty 50 Index Fund
- UTI Nifty 50 Index Fund
- ICICI Prudential Nifty 50 Index Fund
Best Index Funds in India
FEATURED PARTNER OFFER
Motilal Oswal Nasdaq 100 FOF Scheme
AUM
INR 4,235 cr
Minimum Investment
INR 500
Return since inception
21.48% p.a.
AUM
INR 4,235 cr
Minimum Investment
INR 500
Return since inception
21.48% p.a.
Why We Picked It
The fund has no lock-in and has an exit load of 1%. Since its launch, it has provided an average annual return of 22.58%, doubling its money every four years. It is an international equity mutual fund and has better average monthly returns and Sharpe ratio (risk-adjusted returns) than the category average. This fund is a good fit for investors looking to invest in the largest 100 non-financial companies listed on the Nasdaq Stock Market. Most stocks here are focused on technology. A word of caution: the fund stands to have better returns if invested in for five years or more as the gains then beat the inflation rate as well as income from fixed-income instruments.
FEATURED PARTNER OFFER
Bandhan Nifty 50 Index Fund
AUM
INR 1,002 cr
Minimum Investment
INR 100
Return since inception
13.49% p.a.
AUM
INR 1,002 cr
Minimum Investment
INR 100
Return since inception
13.49% p.a.
Why We Picked It
There is no lock-in and the exit load is nil. Since its launch, the fund has delivered an average annual return of 13.49%. It has doubled the money invested in it every four years. The fund has lower volatility compared with the category’s average in terms of standard deviation. The fund’s performance, in terms of outperformance consistency, has been good.
It’s suitable for long-term investors with a good risk appetite looking to invest in equities and equity-related instruments. Funds in this index may beat inflation in the long term.
FEATURED PARTNER OFFER
UTI Nifty 50 Index Fund
AUM
INR 13,627 cr
Minimum Investment
INR 500
Return since inception
13.35% p.a.
AUM
INR 13,627 cr
Minimum Investment
INR 500
Return since inception
13.35% p.a.
Why We Picked It
This medium-sized index fund has zero exit load and no lock-in as well. This also has lower volatility compared with the category average in terms of standard deviation and moderate volatility in terms of beta. It’s a large-cap index fund with above-average performance among peers. The majority of its allocation is in domestic equities.
This fund displays above-average risk management in plunging markets. In fact, within the large-cap mutual funds, this fund is top-rated and is ideal for long-term investors with a strong risk appetite.
FEATURED PARTNER OFFER
ICICI Prudential Nifty 50 Index Fund
AUM
INR 5,733 cr
Minimum Investment
INR 105
Return since inception
13.43% p.a.
AUM
INR 5,733 cr
Minimum Investment
INR 105
Return since inception
13.43% p.a.
Why We Picked It
This is another fund with no lock-in and nil exit load. Since its launch, it has delivered an average annual return of 13.43%. It’s a large-cap fund with a low volatility compared with the category average in the standard deviation segment. It has moderate volatility in terms of beta. When stock prices fall, it tends to experience less decline.
It’s a good idea to invest for a minimum of five years to beat inflation rates. However, ups and downs might mark the investment journey. It’s better suited for equity investors who lean towards conservative investments.
FEATURED PARTNER OFFER
Nippon India Index S&P BSE Sensex
AUM
INR 579 cr
Minimum Investment
INR 500
Return since inception
13.44% p.a.
AUM
INR 579 cr
Minimum Investment
INR 500
Return since inception
13.44% p.a.
Why We Picked It
The fund has no lock-in but has an exit load of 0.25%. Since its launch, the fund has delivered an average annual return of 13.44%, doubling investors’ money every four years. It has lower volatility in terms of standard deviation and beta, compared with the category average.
It is suitable for people looking to invest long-term in equity and equity-related securities in portfolios replicating Sensex.
Methodology
To create our list, we conduct thorough qualitative and quantitative research. We analyze a range of factors, including historical financial data and future projections, to select our top five picks. This article outlines some of the specific parameters we use. It’s important to note that while our list is not comprehensive, we strive to provide a diverse range of choices.
We began with a list of about 15 top-performing index funds in the country and then zeroed in on the top five by focusing on low fees, robust returns and expense ratios. We considered category averages to favor some funds over others. We also attempted to be varied in terms of indices underlying the funds.
To ensure that our viewers are well informed, we have also laid out minimum investment amounts and lock-in periods for these funds.
Comparison of best index funds in India
In this table, we have compiled important parameters of the top index funds in India, which should help you pick the right ones for yourself.
| COMPANY | Company – Logo | Forbes Advisor India Rating | Forbes Advisor Rating | Expense Ratio | Category Average | 3-year Performance | Learn More CTA text | Learn more CTA below text | View more |
|---|---|---|---|---|---|---|---|---|---|
| Motilal Oswal Nasdaq 100 FOF Scheme |  | INR 4,235 cr | INR 500 | 21.48% p.a. | View More | ||||
| Bandhan Nifty 50 Index Fund | | INR 1,002 cr | INR 100 | 13.49% p.a. | View More | ||||
| UTI Nifty 50 Index Fund |  | INR 1,002 cr | INR 100 | 13.49% p.a. | View More | ||||
| ICICI Prudential Nifty 50 Index Fund |  | INR 5,733 cr | INR 105 | 13.43% p.a. | View More | ||||
| Nippon India Index S&P BSE Sensex |  | INR 579 cr | INR 500 | 13.44% p.a. | View More |
Note: All technical data is sourced as on Jan.10, 2024.
What is an index fund?
It is a type of passively managed mutual fund or exchange-traded fund. This fund attempts to track and match the performance—risk and return—of a financial market index such as NIFTY 50, Sensex, NIFTY Next 50, etc. It achieves the task by imitating the exact composition of the chosen index. Since they are passively managed, their expenses and fees are less than those of actively managed funds.
How do index funds work?
In index funds, a manager does not actively pick stocks or time the market. Instead, he or she builds the portfolio by mimicking the composition of a specific market index. When the index profile mimics the market as a whole or a segment of it, the index fund matches mimics the performance.
Who should invest in index funds?
Investors who like simplicity in their equity investments usually find index funds useful. Additionally, the index funds are suitable for investors who are happy with market-level returns and who want to eliminate fund manager’s bias.
Besides, if you are someone who doesn’t like to track performance continuously, the funds are a good choice.
What are the advantages of investing in index funds?
Over the last few years, index funds have seen a rise in their popularity. It’s not to say that actively managed funds have lost their charm but that more and more people understand what comes with passively managed index funds. Some of the benefits are detailed out below.
Diversification: Since most indices include a basket of stocks, the portfolio remains diversified across sectors. Plus, there are limits to exposure to an individual stock, reducing concentration risks in the portfolio.
Low expenses and fees: Since a team of analysts is not required to manage an index fund, its expenses and associated fees are low. In fact, the cost of an actively managed equity mutual fund is remarkably lower than that of an actively managed one.
Elimination of fund manager’s bias: In passively managed index funds, the fund managers replicate the tracked index. He or she does not cherry-pick stocks to buy or sell. This eliminates the bias that comes with having a fund manager, actively managing a portfolio—selecting stocks based on how he or she times the market.
How to invest in an index fund?
Investing in an index fund is simple. You have to follow the following steps to begin your journey.
Step 1: Pick index funds you like
Step 2: Ensure that they are in line with your investment goals
Step 3: Visit your bank or demat service provider – either online or in person
Step 4: Open an investment account
Step 5: Choose your SIP/investment amount and mode of investment
Step 6: Make payment and begin your journey
Bottom Line
Index funds are passively managed mutual funds that mimic financial market indices in composition and therefore in performance. To pick the fund that matches your investment goals, do your due diligence. Also, ensure you know which mode to invest in – lump sum or SIPs. Last but not least, remember that these funds typically do well over a longer time frame – five years or more.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
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As an investment expert with a deep understanding of index funds and the financial markets, let me provide you with comprehensive insights into the concepts discussed in the Forbes Advisor article about the top index funds in India.
Top Index Funds in India:
-
Motilal Oswal Nasdaq 100 FOF Scheme:
- AUM (Assets Under Management): INR 4,235 cr
- Minimum Investment: INR 500
- Return since Inception: 21.48% p.a.
- Why Picked: No lock-in, 1% exit load. Annual return of 22.58%, doubling money every four years. Ideal for long-term investors focusing on the largest 100 non-financial companies listed on the Nasdaq Stock Market, with a focus on technology.
-
Bandhan Nifty 50 Index Fund:
- AUM: INR 1,002 cr
- Minimum Investment: INR 100
- Return since Inception: 13.49% p.a.
- Why Picked: No lock-in, no exit load. Annual return of 13.49%, doubling money every four years. Suitable for long-term investors with a good risk appetite looking to invest in equities and equity-related instruments.
-
UTI Nifty 50 Index Fund:
- AUM: INR 13,627 cr
- Minimum Investment: INR 500
- Return since Inception: 13.35% p.a.
- Why Picked: No exit load, no lock-in. Large-cap index fund with above-average performance among peers. Ideal for long-term investors with a strong risk appetite.
-
ICICI Prudential Nifty 50 Index Fund:
- AUM: INR 5,733 cr
- Minimum Investment: INR 105
- Return since Inception: 13.43% p.a.
- Why Picked: No lock-in, no exit load. Large-cap fund with low volatility compared to the category average. Suitable for conservative equity investors willing to invest for a minimum of five years.
-
Nippon India Index S&P BSE Sensex:
- AUM: INR 579 cr
- Minimum Investment: INR 500
- Return since Inception: 13.44% p.a.
- Why Picked: No lock-in, 0.25% exit load. Annual return of 13.44%, with lower volatility compared to the category average. Suitable for long-term investment in equity and equity-related securities replicating Sensex.
Methodology:
- The Forbes Advisor team conducts thorough qualitative and quantitative research to select the top five index funds in India.
- Factors considered include historical financial data, future projections, low fees, robust returns, and expense ratios.
- The list aims to provide diversity in terms of indices underlying the funds.
Comparison Table of Best Index Funds in India:
- Provides essential parameters such as AUM, Minimum Investment, Return since Inception, and Expense Ratio for each fund.
- This aids readers in making informed decisions about the right funds for their investment goals.
What is an Index Fund?
- A passively managed mutual fund or ETF that tracks the performance of a financial market index (e.g., NIFTY 50, Sensex) by imitating its composition.
- Due to passive management, index funds have lower expenses compared to actively managed funds.
How do Index Funds Work?
- Index funds replicate the composition of a specific market index without actively picking stocks or timing the market.
- Performance of index funds mirrors the performance of the tracked index.
Who Should Invest in Index Funds?
- Investors seeking simplicity and market-level returns.
- Those who want to eliminate the bias of fund managers.
- Ideal for individuals who prefer not to continuously track performance.
Advantages of Investing in Index Funds:
- Diversification across sectors due to the basket of stocks in most indices.
- Lower expenses and fees compared to actively managed funds.
- Elimination of fund manager bias as index funds replicate tracked indices.
How to Invest in an Index Fund:
- Choose index funds aligned with your goals.
- Ensure alignment with your investment objectives.
- Open an investment account with a bank or demat service provider.
- Choose SIP/investment amount and mode.
- Make payment to start the investment journey.
Bottom Line:
- Index funds are passively managed, mimicking financial market indices.
- Successful investment requires due diligence to align with your goals and understanding of investment modes (lump sum or SIP).
- Index funds typically perform well over a longer time frame, ideally five years or more.
