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How to Choose Index Funds in India

How ti Choose index funds

Index funds are mutual funds / investment funds that follow a benchmark index such as Nifty 50, S&P 500 or Nasdaq 100. When an investor invests money in index fund that amount is used to invest in all the companies that make up that particular index, this helps an investor to hold more diversified portfolio than buying an individual stocks.

HDFC Index Fund NIFTY 50 Plan  is a index fund

An “index fund” is type of mutual fund or exchange traded fund that seeks to track the returns of a market index. The S&P 500 Index, the Russell 2000 index, and the Nifty 50 are just a few examples of market indexes that index funds may seek to track.

Index funds better than stocks?

Investing in index fund is more advantageous than investing in individual stock for following reason-

  1. It keeps costs low – being a passive fund index fund have lower expense ratio as compare to active funds
  2. Lower risk through diversification

Hence most of the experts agree that index funds are a very good investments for long term investors.

Since index funds are usually ETFs, there are no load fees. And these days, ETFs can be purchased and sold with most major brokerages commission-free. A third potential limitation with actively managed funds is that they often require large minimum investments

Best Index Funds to Invest in 2022

Sl. no.

Top Index Funds

Features 

3-Year Annualised returns

5-Year Annualised returns

1.

Nippon India Index Fund Sensex Plan Direct-Growth

NAV: 29.32
Expense Ratio: 0.15%
AUM: 282.71 Cr

14.84%

12.82%

2.

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%

3.

Aditya Birla Sun Life Nifty Next 50

NAV: 9.88
Expense Ratio: 1.03%
AUM: 35.3 Cr

NA

NA

4.

UTI Nifty Index Fund Direct-Growth

NAV: 113.29
Expense Ratio: 0.21%
AUM: 7068.1 Cr

14.83%

12.09%

5.

IDFC Nifty 50 Index Fund

NAV: 35.48
Expense Ratio: 0.46%
AUM: 424.17 Cr

14..74%

11.97%

6.

Tata S&P BSE Sensex Index Fund

NAV: 145.16
Expense Ratio: 0.27%
AUM: 137.06 Cr

14.58%

12.67%

7.

ICICI Prudential Nifty Direct Plan-Growth

NAV: 170.57
Expense Ratio: 0.18%
AUM: 3065.63 Cr

14.84%

11.90%

8.

HDFC Nifty 50 Plan Direct-Growth

NAV: 157.74
Expense Ratio: 0.2%
AUM: 5940.60 Cr

17.75%

14.23%

9.

SBI Nifty Index Direct Plan-Growth

NAV: 150.74
Expense Ratio: 0.18%
AUM: 2416.93 Cr

17.68%

14.10%

10.

Aditya Birla Sun Life Nifty 50 Direct-Growth

NAV: 168.43
Expense Ratio: 0.32%
AUM: 384.29 Cr

17.53%

13.95%

11.

Axis Nifty 100 Index Fund Direct-Growth

NAV: 14.70
Expense Ratio: 0.15%
AUM: 760.18 Cr

57.93%

NA

12.

Tata Index Nifty Direct

NAV: 109.86
Expense Ratio: 0.16%
AUM: 263.47 Cr

17.71%

14.25%

13.

DSP Nifty 50 Index Fund Direct-Growth

NAV: 15.89
Expense Ratio: 0.21%
AUM: 198.7 Cr

17.66%

NA

14

Franklin India NSE Nifty 50 Index-Growth

NAV: 138.04
Expense Ratio: 0.3%
AUM: 439.29 Cr

17.45%

13.88%

15

L&T Nifty 50 Index Fund Direct-Growth

NAV: 19.08
Expense Ratio: 0.2%
AUM: 94.26 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. 

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.

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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