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Best Index Funds – Top 20 Index Funds in India
Index funds replicate the performance of a stock market index, such as the Sensex or Nifty 50 to generate maximum returns. These funds are one of the most sought-after passive investments. Their broad market exposure, low operating expenses and returns make them ideal for investors with a medium-risk appetite. If you are considering investing in index mutual funds, here’s a complete list of the 20 best index funds in India you can invest in this year. Take a look!
Best Index Funds to Invest in 2023
| Sl. no. | Top Index Funds | Features | 3-Year Annualised returns | 5-Year Annualised returns |
| 1. | Navi Nifty 50 Index Fund | NAV: 10.3335 Expense Ratio: 0.06% AUM: 276.578 Cr | NA | NA |
| 2. | Navi Nifty Next 50 Index Fund | NAV: 9.4319 Expense Ratio: 0.12% AUM: 40.161 Cr | NA | NA |
| 3. | Nippon India Index Fund Sensex Plan Direct-Growth | NAV: 29.32 Expense Ratio: 0.15% AUM: 282.71 Cr | 14.84% | 12.82% |
| 4. | HDFC Index Fund – S&P BSE Sensex Plan – Direct Plan | NAV: 516.27 Expense Ratio: 0.20% AUM: 3390.39 Cr | 17.22% | 14.42% |
| 5. | Aditya Birla Sun Life Nifty Next 50 | NAV: 9.88 Expense Ratio: 1.03% AUM: 35.3 Cr | NA | NA |
| 6. | UTI Nifty Index Fund Direct-Growth | NAV: 113.29 Expense Ratio: 0.21% AUM: 7068.1 Cr | 14.83% | 12.09% |
| 7. | IDFC Nifty 50 Index Fund | NAV: 35.48 Expense Ratio: 0.46% AUM: 424.17 Cr | 14..74% | 11.97% |
| 8. | Tata S&P BSE Sensex Index Fund | NAV: 145.16 Expense Ratio: 0.27% AUM: 137.06 Cr | 14.58% | 12.67% |
| 9. | ICICI Prudential Nifty Direct Plan-Growth | NAV: 170.57 Expense Ratio: 0.18% AUM: 3065.63 Cr | 14.84% | 11.90% |
| 10. | HDFC Nifty 50 Plan Direct-Growth | NAV: 157.74 Expense Ratio: 0.2% AUM: 5940.60 Cr | 17.75% | 14.23% |
| 11. | SBI Nifty Index Direct Plan-Growth | NAV: 150.74 Expense Ratio: 0.18% AUM: 2416.93 Cr | 17.68% | 14.10% |
| 12. | Aditya Birla Sun Life Nifty 50 Direct-Growth | NAV: 168.43 Expense Ratio: 0.32% AUM: 384.29 Cr | 17.53% | 13.95% |
| 13. | Axis Nifty 100 Index Fund Direct-Growth | NAV: 14.70 Expense Ratio: 0.15% AUM: 760.18 Cr | 57.93% | NA |
| 14. | Tata Index Nifty Direct | NAV: 109.86 Expense Ratio: 0.16% AUM: 263.47 Cr | 17.71% | 14.25% |
| 15. | DSP Nifty 50 Index Fund Direct-Growth | NAV: 15.89 Expense Ratio: 0.21% AUM: 198.7 Cr | 17.66% | NA |
| 16 | Franklin India NSE Nifty 50 Index-Growth | NAV: 138.04 Expense Ratio: 0.3% AUM: 439.29 Cr | 17.45% | 13.88% |
| 17 | L&T Nifty 50 Index Fund Direct-Growth | NAV: 19.08 Expense Ratio: 0.2% AUM: 94.26 Cr | NA | NA |
| 18 | Taurus Nifty 50 Index Fund – Growth | NAV: 32.01 Expense Ratio: 1.06% AUM: 1.69 Cr | 14.13% | 12.38% |
| 19 | Sundaram Nifty 100 Equal Weight Fund – Direct Plan – IDCW | NAV: 64.30 Expense Ratio: 0.53% AUM: 52.86 Cr | 19.47% | 13.45% |
| 20 | Motilal Oswal Nifty 200 Momentum 30 Index Fund – Direct Plan-Growth | NAV: 8.64 Expense Ratio: 0.3% AUM: 132.39 Cr | NA | NA |
*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
Compare and streamline your options and choose the best investment plan for yourself.
What is an Index Fund and How does it Work?
An index fund tracks a market index and replicates the performance of the underlying index. Unlike actively managed funds, for index mutual funds, fund managers have little or no role to play in buying and selling of stocks.
As fund managers do not actively take all buying and selling decisions, they are comparatively cheaper than other mutual funds. However, the fund manager decides which stocks have to be bought and sold according to the composition of the underlying benchmark.
Therefore, investing in index mutual funds is convenient for individuals seeking low-cost investment options.
Also Read: Active Mutual Fund vs Index Mutual Fund
Who Should Invest in Index Funds?
It’s advised to invest in funds as a part of your asset allocation. 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 Fund’s Performances 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. For instance, if you want to invest in equities but are wary of the risks associated with actively managed equities, you can choose the 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 toward 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 index and don’t require any manual intervention when it comes to the selection of stocks.
Also Read: How To Invest In Mutual Funds
How to Invest in Best Index Funds?: 4 Factors to Consider
Here are a few things to consider before investing in index funds:
1. Fund Performance
Before you invest, check the fund’s performance. An indicator of good fund performance is minimum tracking error. Best index funds work by replicating the performance of an index. However, there could be slight deviations from the index, which is known as tracking error. That’s why funds that have minimum tracking error are your best bet.
2. Investment Horizon
Index funds are suitable for investors who are looking for long-term investment. The returns fluctuate in index mutual funds. That’s why they are not ideal for short-term investment. In the long-term, say 7-10 years, help the fund show its full potential.
3. Risk
Index funds are highly volatile. 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.
Also Read: 10 Best Mutual Funds To Invest In India With High Returns
Benefits of Investing in Index Mutual Funds
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.
2. Transparency
Unlike active mutual funds vehicles, 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 Index Funds
The returns on these funds are taxable and depend on two factors- holding period and fund type.
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 of up to 10% on gains above 1 lakh.
Also Read: Taxation in Mutual Funds
Final Word
Over the past couple of years, index funds have been performing at par if not better than actively managed equity funds. Also, these funds cost less and have the potential to generate high returns in the long run. However, it’s advised that you consider your risk tolerance, taxation, fund performance, and overall cost, among others before investing. Now that you know about the best index funds in India, you could consider investing in. Start putting your money to work in Navi Mutual Fund. Just download the Navi app, explore a host of low-cost index funds and start investing today!
*Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
FAQs on Best Index Funds in India
Ans: The lock-in period for index mutual funds is 3 years.
Ans: No, most of the index funds in India do not come with a dividend plan.
Ans: Yes, as index mutual funds are market-linked products, you can lose money.
Ans: Here are some factors that you must consider before investing in an index fund:
Risks and returns
Expense ratio
Investment objective
Tax
Tracking error
Ans: Yes. However, the fee is much lesser compared to actively managed funds where the expense ratio is higher.
Ans: 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.
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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.
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