Best Index Funds: List of Top Index Funds in India to Invest in 2022

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 August (2022)

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

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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.