Looking for “index mutual funds India”? Here’s a suitable describing quote:
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson
Investing isn’t about chasing thrills; it’s about strategic planning. When it comes to a no-nonsense, reliable investment strategies, index mutual funds in India have rapidly climbed the ranks. Whether you’re a newbie or a seasoned investor, index mutual funds in India offer a simple, effective, and low-cost way to grow your wealth in sync with the broader market.
Start investing in Index Funds.
What Are Index Funds?
Before we explore the top index mutual funds in India, let’s clarify what index funds actually are. Index funds are a type of mutual fund designed to replicate the performance of a specific market index, like the Nifty 50 or Sensex.
Rather than trying to outperform the market as active funds do, index funds simply aim to mirror the market’s performance, offering investors a slice of the market’s pie with minimal fees.
For a more detailed explanation of the benefits of index funds, check out Kuvera’s comprehensive guide on index funds here.
Types of Index Funds
When talking about index funds in India, they come in various flavours. Here’s a quick rundown of the different types you can find:
1. Broad Market Index Funds
These funds track large-cap indices like the Nifty 50 or Sensex, offering exposure to the most prominent companies in the country.
2. Mid-Cap and Small-Cap Index Funds
Want to dip your toes into smaller companies? These funds track indices focusing on mid-cap or small-cap stocks, which can offer higher growth potential but come with more risk.
3. Sectoral/Thematic Index Funds
These funds track specific sectors (like IT, pharma) or themes (like ESG), making them a more focused bet on particular parts of the market.
4. Bond Index Funds
Not all index funds track equities. Bond index funds track bond indices, providing a fixed-income alternative with typically lower risk.
5. International Index Funds
For the globally minded, these funds track indices outside India, like the S&P 500, giving you exposure to global giants.
How Is the Performance of Index Funds Measured?
Measuring the performance of index funds isn’t as tricky as it sounds. Here’s how it’s typically done:
1. Tracking Error
This measures how closely the fund’s returns match the index. A lower tracking error means the fund is doing a good job mimicking the index.
2. Expense Ratio
Since index funds are passively managed, they generally have lower expense ratios than active funds. However, it’s still a crucial factor, as a lower expense ratio means more returns go into your pocket.
3. Returns
Of course, the actual returns over different periods (1 year, 3 years, 5 years) are essential. But remember, the goal is to match the index, not outperform it.
What Affects the Performance?
Index funds are straightforward, but several factors can impact their performance:
1. Market Volatility
Since index funds track the market, they are subject to the same ups and downs as the market.
2. Inflation
Inflation can erode real returns, making it an essential factor to consider, especially for long-term investments.
3. Interest Rates
Changes in interest rates can affect bond index funds more directly, but even equity index funds can feel the ripple effects.
4. Tracking Error
As mentioned earlier, this is a key factor. Even though it’s usually minimal, any deviation from the index can impact performance.
Now, let us see the top 10 mutual funds under various parameters and categories
Top 10 Index Funds Classified on the Basis of Last 1-Year Return (in %)
Scheme Name Benchmark Index Return 1-Year (%) Direct
Motilal Oswal BSE Enhanced Value Index Fund BSE Enhanced Value Total Return Index 85.86%
UTI Nifty 500 Value 50 Index Fund Nifty 500 Value 50 Total Return Index 83.78%
SBI Nifty Next 50 Index Fund NIFTY Next 50 Total Return Index 68.94%
Edelweiss Nifty Next 50 Index Fund NIFTY Next 50 Total Return Index 68.90%
DSP Nifty Next 50 Index Fund NIFTY Next 50 Total Return Index 68.89%
ICICI Prudential Nifty Next 50 Index Fund NIFTY Next 50 Total Return Index 68.88%
UTI Nifty Next 50 Index Fund NIFTY Next 50 Total Return Index 68.87%
Motilal Oswal Nifty Next 50 Index Fund NIFTY Next 50 Total Return Index 68.81%
Aditya Birla Sun Life Nifty Next 50 Index Fund NIFTY Next 50 Total Return Index 68.77%
Kotak Nifty Next 50 Index Fund NIFTY Next 50 Total Return Index 68.72
Source: Data from Association of Mutual Funds in India (AMFI) as of 22nd Aug 2024
Top 10 Index Funds Classified on the Basis of Last 3-Year Returns (in %)
| Scheme Name | Benchmark Index | Return 3-Year (%) Direct |
|---|---|---|
| Aditya Birla Sun Life Nifty Mid-Cap 150 Index Fund | NIFTY Mid-Cap150 Total Return Index | 28.83 |
| Motilal Oswal Nifty Mid-Cap 150 Index Fund | NIFTY Mid-Cap150 Total Return Index | 28.77 |
| Nippon India Nifty Mid-Cap 150 Index Fund | NIFTY Mid-Cap150 Total Return Index | 28.56 |
| Motilal Oswal Nifty Small-Cap 250 Index Fund | NIFTY Small-Cap 250 Total Return Index | 28.24 |
| Nippon India Nifty Small-Cap 250 Index Fund | NIFTY Small-Cap 250 Total Return Index | 28.14 |
| UTI Nifty200 Momentum 30 Index Fund | Nifty 200 Momentum 30 Total Return Index | 26.24 |
| Kotak Nifty Next 50 Index Fund | NIFTY Next 50 Total Return Index | 24.24 |
| DSP Nifty Next 50 Index Fund | NIFTY Next 50 Total Return Index | 24.13 |
| SBI Nifty Next 50 Index Fund | NIFTY Next 50 Total Return Index | 24.05 |
| LIC MF Nifty Next 50 Index Fund | NIFTY Next 50 Total Return Index | 24.02 |
Source: Data from Association of Mutual Funds in India (AMFI) as of 22nd Aug 2024
Top 10 Index Funds Classified on the Basis of Last 5-Year Returns (in %)
| Scheme Name | Benchmark Index | Return 5-Year (%) Direct |
|---|---|---|
| UTI Nifty Next 50 Index Fund | NIFTY Next 50 Total Return Index | 24.33 |
| DSP Nifty Next 50 Index Fund | NIFTY Next 50 Total Return Index | 24.18 |
| ICICI Prudential Nifty Next 50 Index Fund | NIFTY Next 50 Total Return Index | 24.10 |
| LIC MF Nifty Next 50 Index Fund | NIFTY Next 50 Total Return Index | 24.05 |
| DSP Nifty 50 Equal Weight Index Fund | NIFTY 50 Equal Weight Total Return Index | 23.81 |
| Sundaram Nifty 100 Equal Weight Fund | NIFTY 100 Equal Weighted Total Return Index | 23.52 |
| Bandhan Nifty 50 Index Fund | NIFTY 50 Total Return Index | 18.99 |
| Quantum Nifty 50 ETF | NIFTY 50 Total Return Index | 18.95 |
| UTI Nifty 50 Index Fund | NIFTY 50 Total Return Index | 18.82 |
| ICICI Prudential Nifty 50 Index Fund | NIFTY 50 Total Return Index | 18.80 |
Source: Data from Association of Mutual Funds in India (AMFI) as of 22nd Aug 2024
Wrapping Up
Index mutual funds India have grown in popularity thanks to their simplicity, low cost, and the steady returns they offer by mirroring market indices. With the right mix of index funds, you can build a diversified portfolio that aligns with your investment goals, whether you’re aiming for growth, income, or a balanced approach.
Remember, while index funds are a fantastic way to participate in the market with minimal effort, it’s essential to consider your risk tolerance, investment horizon, and financial goals before diving in. Always keep an eye on factors like tracking error and expense ratios to ensure you’re getting the best bang for your buck.
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: Investing In Passive Funds
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DISCLAIMER: Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investments in securities market are subject to market risks. Read all the related documents carefully before investing. The securities quoted are for illustration only and are not recommendatory.
