20 Best Index Funds to Invest in India in April 2023
What is an Index Fund?
An index fund is a type of mutual fund or exchange-traded fund (ETF) that replicates the performance of a stock market index, such as the Sensex or the Nifty 50 in a bid to generate maximum returns. These are passively managed funds, meaning the fund manager instead of picking stocks to invest in and strategising on when to buy and sell them, builds a portfolio whose holdings match the index. Index funds’ broad market exposure, low operating expenses, and returns make them ideal for investors with a medium-risk appetite. If you are considering investing in some of the best index funds in India, we have curated a list of 20 best index mutual funds in 2023 in India. Check them out!
20 Top Index Funds in India 2023
Here is the list of 20 best index funds in India to Invest in 2023:
| Top Index Funds 2023 | Features |
| Navi Nifty 50 Index Fund | NAV: 10.81 Expense Ratio: 0.06% AUM: ₹697.46 |
| Navi Nifty Next 50 Index Fund | NAV: ₹8.89 Expense Ratio: 0.12% AUM: ₹88.19 Cr |
| Motilal Oswal Nifty Midcap 150 Index Fund | NAV: ₹20.31 Expense Ratio: 0.22% AUM: ₹644.74 Cr |
| Motilal Oswal Nifty Smallcap 250 Index Fund | NAV: ₹19.56 Expense Ratio: 0.31% AUM: ₹312.80 Cr |
| DSP Nifty 50 Equal Weight Index Fund | NAV: ₹16.06 Expense Ratio: 0.40% AUM: ₹498.82 Cr |
| Sundaram Nifty 100 Equal Weight Fund | NAV: ₹107.50 Expense Ratio: 0.46% AUM: ₹52.67 Cr |
| Bandhan Nifty 50 Index | NAV: ₹37.52 Expense Ratio: 0.10% AUM: ₹644.34 Cr |
| UTI Nifty 50 Index Fund | NAV: ₹117.98 Expense Ratio: 0.20% AUM: ₹9,475.27 Cr |
| ICICI Prudential Nifty 50 Index Fund | NAV: ₹177.61 Expense Ratio: 0.17% AUM: ₹3,977.09 Cr |
| Tata Nifty 50 Index Fund | NAV: ₹114.48 Expense Ratio: 0.16% AUM: ₹369.33 Cr |
| Axis Nifty 100 Index Fund | NAV: ₹14.95 Expense Ratio: 0.15% AUM: ₹953.38 Cr |
| Nippon India Index Fund Nifty 50 | NAV: ₹28.95 Expense Ratio: 0.20% AUM: ₹638.77 Cr |
| Nippon India Index Fund – S&P BSE Sensex | NAV: ₹29.45 Expense Ratio: 0.82% AUM: ₹374.75 Cr |
| HDFC Index Fund Nifty 50 | NAV: ₹161.26 Expense Ratio: 0.40% AUM: ₹7,457.48 Cr |
| DSP Nifty 50 Index Fund | NAV: ₹14.7 Expense Ratio: 0.3% AUM: ₹227.68 Cr |
| Aditya Birla Sun Life Nifty 50 Index Fund | NAV: ₹175.17 Expense Ratio: 0.32% AUM: ₹494.36 Cr |
| SBI Nifty Index Fund | NAV: ₹156.96 Expense Ratio: 0.18% AUM: ₹3,324.56 Cr |
| ICICI Prudential S&P BSE Sensex Index Fund | NAV: ₹19.01 Expense Ratio: 0.16% AUM: ₹694.87 Cr |
| Franklin India NSE Nifty 50 Index Fund | NAV: ₹143.74 Expense Ratio: 0.24% AUM: ₹482.31 Cr |
| IDBI Nifty Index Fund | NAV: ₹34.62 Expense Ratio: 0.32% AUM: ₹188.93 Cr |
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
How do Index Funds Work?
Index funds track the performance of a specific market index. The fund holds a portfolio of stocks that closely mirrors the components of the index it is designed to track. An index fund’s aim is to closely match the performance of the index it is tracking.
Index funds are passively managed funds, meaning the fund manager doesn’t actively take part into analysing stocks to make investment decisions. The fund manager’s role is to ensure that the fund’s portfolio closely mirrors the index, and to make any necessary adjustments when the components of the index change. Point to note: since the funds are not actively managed, there are no fund management-related costs involved. This is also the reason why index funds are considered as low-cost funds.
Performance of Best Index Funds 2023 in India
Here are some of the best index funds in India ranked as per the returns generated over the last three and five years:
With Navi Nifty 50 Index Fund, you get a chance to invest in India’s top 50 companies, in terms of total market capitalisation and maximise the profit margin of your investment in line with the performance of the underlying index. Being technology-backed and passively managed, this fund has an extremely low expense ratio and tracking error. Moreover, it is free from human discretionary biases, which could help mitigate your risks further. Some important details are:
- NAV: ₹10.81
- Expense Ratio: 0.06%
- AUM: ₹697.46 crore
- 3-Year Annualised Returns: NA
- 5-Year Annualised Returns: NA
Want to invest in 50 of tomorrow’s leaders? Navi Nifty Next 50 Index Fund tracks and replicates the performance of the Nifty Next 50 index, consisting of the top 50 emerging companies, with high growth potential and relatively high stability. This fund offers low-cost investing, high transparency, and high returns potential. Being technology-backed, it also has a low tracking error, meaning you can expect the fund to perform in close alignment with that of the benchmark index. Here are some details that you must consider before investing in this fund:
- NAV: ₹8.89
- Expense Ratio: 0.12%
- AUM: ₹88.19 Cr
- 3-Year Annualised Returns: NA
- 5-Year Annualised Returns: NA
3. Motilal Oswal Nifty Midcap 150 Index Fund
Often considered as one of the best index funds in India based on multiple parameters, this index fund scheme is meant for investors looking to invest in the top midcap companies. As this scheme tracks the Nifty Midcap 150 index, it has the potential to deliver relatively high returns over a long period of time. Let’s check out the fund details:
- NAV: ₹20.31
- Expense Ratio: 0.22%
- AUM: ₹644.74 Cr
- 3-Year Annualised Returns: 36.3%
- 5-Year Annualised Returns: NA
4. Motilal Oswal Nifty Smallcap 250 Index Fund
This is a moderately high-risk mutual fund scheme. It tracks the performance of the Nifty Smallcap 250 index, which mainly consists of companies that are up and coming and have the potential to be market leaders of tomorrow. While you could enjoy a high returns potential on your investment, there may also be some degree of risk associated with market volatility and also credit risk. Here are the scheme details:
- NAV: ₹19.56
- Expense Ratio: 0.31%
- AUM: ₹312.80 Cr
- 3-Year Annualised Returns: 39.5%
- 5-Year Annualised Returns: NA
5. DSP Nifty 50 Equal Weight Index Fund
The list of the best index funds may not be complete without mentioning the DSP Nifty 50 Equal Weight Index Fund.It replicates the Nifty 50 Equal Weight TRI Index which means that the fund follows the same composition and allocation weightage as the underlying index. Here are the details of the scheme:
- NAV: ₹16.06
- Expense Ratio: 0.40%
- AUM: ₹498.82 Cr
- 3-Year Annualised Returns: 32.8%
- 5-Year Annualised Returns:10.9%
6. Sundaram Nifty 100 Equal Weight Fund
The fund is a smart beta fund, which could be considered as an attractive alternative to traditional index-based funds. The scheme could be suitable for investors seeking to invest in companies that are constituents of NIFTY 100 Equal Weighted Index. Here are the scheme details:
- NAV: ₹107.50
- Expense Ratio: 0.46%
- AUM: ₹52.67 Cr
- 3-Year Returns: 27.0%
- 5-Year Returns: 8.4%
7. Bandhan Nifty 50 Index Fund
IDFC Nifty 50 is an open-ended index fund scheme from IDFC Mutual Fund. The fund could be suitable for investors having a minimum investment horizon of 3 years. Here are some of the important details of the scheme:
- NAV: ₹37.52
- Expense Ratio: 0.10%
- AUM: ₹644.34 Cr
- 3-Years Annualised Return: 27.4%
- 5-Years Annualised Return: 12.6%
8. UTI Nifty 50 Index Fund
UTI Nifty Index Fund is often considered among the best open-ended index fund schemes that replicate/track the Nifty 50 Index. The found house claims that this scheme could be ideal for investors with an investment horizon of 5 years or more. Here are some of the details of the mutual fund scheme:
- NAV: ₹117.98
- Expense Ratio: 0.2%
- AUM: ₹9,475.27 Cr
- 3-Year Annualised Returns: 27.5%
- 5-Year Annualised Returns: 12.4%
9. ICICI Prudential Nifty 50 Index Fund
ICICI Prudential Nifty 50 Index Fund is an open-ended mutual fund scheme seeking to track the performance of Nifty 50 index. It aims to generate returns in line with the performance of the benchmark index. This scheme could be ideal for investors looking for long-term growth. Here are some of the scheme details:
- NAV: ₹177.61
- Expense Ratio: 0.17%
- AUM: ₹3,977.09 Cr
- 3-Year Annualised Returns: 27.4%
- 5-Year Annualised Returns: 12.3%
10. Tata Nifty 50 Index Fund
Tata Nifty 50 is often counted among the best index funds in India. It aims to provide returns that closely correspond to the returns of the Nifty 50 index. The fund could be suitable for investors who are looking for long-term capital appreciation. Here are some of the details of the index fund scheme:
- NAV: ₹114.48
- Expense Ratio: 0.16%
- AUM: ₹369.33 Cr
- 3-Year Annualised Returns: 27.1%
- 5-Year Annualised Returns: 12.4%
11. Axis Nifty 100 Index Fund
This is a top index fund scheme from Axis Mutual Fund. This open-ended mutual fund scheme could be ideal for investors looking for long-term growth. The scheme aims to provide returns that closely correspond to the total returns of the NIFTY 100 index, subject to tracking errors. Here are the scheme details:
- NAV: ₹14.95
- Expense Ratio: 0.15%
- AUM: ₹953.38 Cr
- 3-Year Returns: 25.9%
- 5-Year Returns: NA
12. Nippon India Index Fund Nifty 50
Nippon India Index Fund Nifty 50 replicates the composition of Nifty 50 to provide returns that closely match the performance of the underlying index. The scheme could be ideal for investors looking for long-term investments. Here are some of the scheme details:
- NAV: ₹28.95
- Expense Ratio: 0.20%
- AUM: ₹638.77 Cr
- 3-Year Annualised Returns: 26.17%
- 5-Year Annualised Returns: 11.41%
13. Nippon India Index Fund S&P BSE Sensex Plan
This is an open-ended scheme replicating/tracking S&P BSE Sensex. The fund aims to generate returns in line with that of S&P BSE Sensex, subject to tracking errors. Here are the details of the scheme:
- NAV: ₹29.45
- Expense Ratio: 0.82%
- AUM: ₹374.75 Cr
- 3-Year Annualised Returns: 26.39%
- 5-Year Returns: 12.66%
14. HDFC Index Fund Nifty 50
This mutual fund scheme could be ideal for investors who want to tap into the potential of India’s 50 leading companies. Currently, the fund invests 100% in domestic equities, of which 35.4% is in financial services, 14.7% in technology, and close to 6% in the automobile sector. Here are the scheme details:
- NAV: ₹161.26
- Expense Ratio: 0.40%
- AUM: ₹7,457.48 Cr
- 3-Year Annualised Returns: 27.14%
- 5-Year Annualised Returns: 12.11%
15. DSP Nifty 50 Index Fund
DSP Nifty 50 Index Fund aims to build wealth by investing equally in the top 50 Indian companies. The scheme facilitates low-cost investing and offers investors an affordable way to invest in India’s top 50 companies. It could be ideal for investors looking to maximise the returns potential of their investment portfolio. Here are the scheme details:
- NAV: ₹14.75
- Expense Ratio: 0.3%
- AUM: ₹227.68 Cr
- 3-Year Annualised Returns: 21.6%
- 5-Year Annualised Returns: NA
16. Aditya Birla Sun Life Nifty 50 Index Fund
Aditya Birla Sun Life Nifty 50 is an open-ended index fund that could be ideal for investors looking for long-term capital growth. The scheme has been in existence since 2002. By investing in this fund, you can diversify your portfolio by getting access to sectors, such as financial services, construction, energy, and technology to name a few. Here are a few important details of the scheme:
- NAV: ₹175.17
- Expense Ratio: 0.32%
- AUM: ₹494.36 Cr
- 3-Year Annualised Returns: 26.9%
- 5-Year Annualised Returns: 12%
17. SBI Nifty Index Fund
SBI Nifty Index Fund could be ideal for investors who want to capture the growth of top 50 companies in a transparent and low-cost manner. Here are some of the details of the scheme:
- NAV: ₹156.96
- Expense Ratio: 0.18%
- AUM: ₹3,324.56 Cr
- 3-Year Annualised Returns: 27.4%
- 5-Year Annualised Returns: 12.2%
18. ICICI Prudential S&P BSE Sensex Index Fund
ICICI Prudential S&P BSE Sensex Index Fund is an open-ended scheme seeking to track and mirror the returns of S&P BSE Sensex index through investments in a basket of stocks that constitute the index. Here are the scheme details:
- NAV: ₹19.01
- Expense Ratio: 0.16%
- AUM: ₹694.87 Cr
- 3-Year Returns: 26.9%
- 5-Year Returns: 13.2%
19. Franklin India NSE Nifty 50 Index Fund
This mutual scheme could be a good option for someone with an investment horizon of 3 years or more and who is seeking long-term capital growth. The fund composition and weightage allocation closely aligns with that of the Nifty 50 Index. Here are the scheme details:
- NAV: ₹143.74
- Expense Ratio: 0.24%
- AUM: ₹482.31 Cr
- 3-Year Returns: 26.9%
- 5-Year Returns: 12.0%
20. IDBI Nifty Index Fund
The scheme could be ideal for investors who want exposure to India’s 50 largest companies, in terms of market capitalisation, in a low-cost manner. It may be ideal for those looking to maximise the long-term returns potential of their investments, in line with the performance of the underlying index. Here are the scheme details:
- NAV: ₹34.62
- Expense Ratio: 0.32%
- AUM: ₹188.93 Cr
- 3-Year Returns: 27.1%
- 5-Year Returns: 12.2%
*Data valid as of 31st March, 2023
Disclaimer: Mutual fund investments are subject to market risks, please read all scheme-related documents carefully.
Who Should Invest in Index Funds?
It’s advised to invest in index funds as a part of your asset allocation strategy. First-time investors can also opt for such funds as a stepping stone to their investment journey.
1. Investors Who Do Not Wish to Track a Fund’s Performance Frequently
The major difference between actively and passively managed funds is that the former requires constant monitoring of the fund’s performance. However, since index mutual funds are passively managed funds, their portfolio constituents and performance depend on the specific index.
2. Investors with a Low-risk Appetite
If you are a risk-averse investor, index mutual funds can be a safer option than actively managed funds, especially for the long term. For instance, if you want to invest in equities but are wary of the risks associated with actively managed equities, you can choose a Nifty index fund. Such funds will track the market index and generate returns accordingly.
3. Investors Looking for Low-cost Funds
Since active funds require human intervention in the form of fund managers, a certain amount of your investment goes towards a range of operational costs like the fund manager’s fee. This makes an actively managed fund a bit costlier. However, for index mutual funds, the expense ratio is much lower as such funds simply replicate the targeted index and don’t require any manual intervention.
In the form of fund managers, a certain amount of your investment goes towards a range of operational costs like the fund manager’s fee. This makes an actively managed fund a bit costlier. However, for index mutual funds, the expense ratio is much lower as such funds simply replicate the targeted index and don’t require any manual intervention.
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Factors to Consider Before Investing in Top Index Funds in India
Here are a few things to consider before investing in index funds:
1. Fund Performance
Although past performance doesn’t guarantee a fund’s future returns, it’s always handy to check a fund’s performance at least over the last 5 years to gauge the fund’s potential. An indicator of good fund performance is low tracking error, which highlights a minimal gap between the fund’s and the index’s performance.
2. Investment Horizon
Index funds are suitable for investors with a long-term investment horizon. Index fund returns could fluctuate in the short term just like any equity fund. However, the longer one stays invested, the more time the investments get to absorb the impact of short-term volatility and generate better risk-adjusted returns.
3. Risk
Index funds are highly volatile just like any other equity fund category. You must be aware of the risks associated with index funds. To reduce index mutual fund risks, have a mix of actively managed funds and index funds.
4. Expense Ratio
Index funds are not actively managed. Hence, they have a lower expense ratio compared to actively managed funds. However, while investing in any best index funds, check the expense ratio. The lower it is, the better your chances to get more percentage of the return the index fund generates.
Advantages of Investing in Best Index Funds in India
1. Low Cost
Index funds have a low expense ratio compared to other mutual funds owing to the passive investing strategy. Thus, if you’re seeking low-cost investment options, index mutual funds can be an option worth considering in a bid to maximise the margin of profits in the long term.
2. Transparency
Unlike active mutual funds, knowing the portfolio of an index mutual fund is easy and simple. All you need to do is know the fund’s benchmark index, and you can determine the securities it holds.
3. Exposure to a Broader Market
Investing in index mutual funds gives you access to diverse sectors and stocks. That way, you can enjoy returns from a larger and diversified market segment through a single fund.
Taxation on Best Index Funds in India
The returns on index equity funds are taxed depending on the holding period of the investment.
If you redeem units of an index fund within 12 months, your returns will attract a short-term capital gains tax (STCG) of 15%.
However, if your holding period is more than 12 months, you are liable to pay long-term capital gains tax (LTCG) tax of 10% on gains exceeding Rs.1 lakh in a financial year.
Final Word
Over the past few years, passive investment instruments like index funds have gained a lot of popularity mainly due to their low-cost nature and transparent investment strategy. Since these are equity funds, they too have the potential to generate high returns in the long term albeit with medium to high levels of market risks involved. However, it’s advised that you consider your return expectations, financial goals, risk tolerance, and liquidity requirements before finalising any investment decision.
Now you have the list of the 20 best index funds in India in 2023, you could consider investing in any of them after due diligence. You can also start investing in Navi Mutual Fund at just Rs.10. Just download the Navi app, explore a host of low-cost index funds across sectors and geographies and start investing today!
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
FAQs
Index funds do not come with any lock-in period whatsoever. Investors are free to redeem their fund units at any point in time – however, that may impact the tax implications on the returns.
Just like any other equity investments, index funds in India do pay dividends. The dividends paid by an index fund will depend on the dividends paid by the companies included in the index the fund is tracking. It is important to note that not all index funds pay dividends, some reinvest the dividends back into the fund.
Like any other equity investment, investing in index funds has its own share of risks. However, you can mitigate these risks via informed investment decisions. For instance, diversifying your investment portfolio could help lower your risk level. Similarly, if you stay invested for the long term, the risk of losing money in index funds is almost zero.
Ideally, you should buy the funds when the market is down and sell when it is high. Although there is no fixed time during which you can start investing in index funds, you should make such investments when the market is on the lower side to avoid a financial burden. That being said, investing regularly as per your goals over the long term could generate desired returns based on fund performance.
Index funds returns are taxable as capital gain and the tax rate depends on the holding period of the index fund units – long-term capital gains (LTCG) and short-term capital gains (STCG). When the period of holding of index fund units is more than 12 months, LTCG tax of 10% is levied on the gains exceeding Rs.1 lakh. When the period of holding is less than 12 months, 15% STCG tax is levied on the gains earned.
Yes, you can either invest via SIP (Systematic Investment Plan) or in lump sum in index fund schemes. For instance, you can invest via SIPs in Navi’s index fund schemes with an amount as low as ₹10.
Index funds have the potential to generate higher returns than fixed deposits. Historically, FD investments have seldom offered more than 10% returns to investors, whereas index funds have the potential to generate more than 20% as returns on your investment. Also, mutual funds as a sector are known to provide inflation-beating returns albeit with certain risks. That being said, to mitigate risks and diversify your portfolio, you could park some money in FDs to enjoy assured returns.
Here are some of the index fund schemes that you could consider:
1. Navi Nifty50 Index Fund
2. Navi Nifty Next 50 Index Fund
3. Nippon India Index Fund – S&P BSE Sensex
4. UTI Nifty 50 Index Fund
5. HDFC Nifty 50 Index Fund
Index funds follow a benchmark index and invest in stocks of companies that make up the particular index like NSE Nifty, and BSE Sensex. The process is the same for fund funds (FoFs).
Index funds’ performance is directly linked to the market, so there is a certain degree of risk, especially if there’s a prolonged market downturn. However, you can mitigate this risk by staying invested for the long term. Another way to cut down the risk would be diversifying your portfolio on the basis of your financial goals and risk appetite.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
