Index funds are one of the most affordable and low-risk investment plans. An index fund is a mutual fund that focuses on a specific index. It offers portfolio diversification and great returns within a period. Today many stock market investors opt to invest in these funds and prefer them as the smartest investment instrument in the current market scenario.
And there is no exception for Indian investors and the investment market. Currently, you can see multiple funds that fall into this category. And, if you want to invest in an index fund, you might also look for the best fund scheme. And today, we will help you by providing a list of the top seven index funds in India that you can try and other things you need to know before investing.
Top seven index funds in India
- Motilal Oswal index fund. – Direct Plan-Growth
2. Sundaram 100-unit equal weight fund – Direct Plan – IDCW
3. FX-indexed mutual fund Taurus nifty 50 – Growth
4. Direct investment in L&T Nifty 50 Index Fund-Growth
5. The Franklin India NSE Nifty 50 Index-Growth
6. Directfund Direct Nifty 50 Index-Growth
What is an index fund?
An index fund is a kind of mutual fund that purchases stocks based on a specific market index. An index fund is passively managed and aims to track and match its holdings with a certain market index. A market index refers to a market section represented by hypothetical stock portfolios and securities. It helps one build a diversified portfolio and buy stocks from firms on an index. Thus, an index fund reflects the performance of a market index rather than individual stocks. Index funds are beneficial to reduce and balance risks in a portfolio because market swings have a lesser volatile impact across an index than individual stocks.
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An index fund offers returns that are comparable to its underlying index as its asset allocation remains the same as its underlying index. One can purchase an index fund from any index fund provider or through their brokerage account.
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How does an index fund work?
An index fund is a type of financial investment tool that pools money from interested investors to invest in bonds or stocks and tracks a chosen market index’s return. Index funds offer diversified ranges of securities at low and cost-effective prices. This wide diversification of securities reduces investment risks in a portfolio. Index funds are also passively managed, and there is no need for investors’ expertise as it imitates the performance of a selected index. Here, stocks and securities perform depending on an underlying benchmark of a market index.
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One can also buy these funds across various classes of assets, including small to large asset values, thus diversifying one’s investment portfolio.
Who should invest in an index fund?
After you have learnt about the index, you may want to know whether you are suitable for these kinds of financial schemes or not. Here, we will discuss who may invest in an index fund.
Non-expert investors
Index funds are passively managed, and an investor does not need to actively manage these funds or track the performance of stocks. These types of funds excessively track and imitates the performance of an invested market index.
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Risk-averse investors
An index fund can be a perfect choice if you are a risk-averse investor. Here, investors invest in several stocks listed in an index with lesser chances of encountering severe market volatility.
Focused on predictable high-returns
If you are an investor who wants to invest in equities for higher returns, then index funds can be the right place for you. Asset allocation in an index fund depends on the underlying index and the market return.
Focused on portfolio-diversification
Portfolio diversification is another vital characteristic of the index fund. Here, an investor can get a wide range of securities at a low cost in a single fund which helps to diversify a portfolio.
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Why should you invest in index funds?
There are multiple benefits of investing in an index fund, and here we will discuss some of them.
Lower risks
An index fund performs according to its underlying benchmark and offers predictable outcomes. Also, volatility risks are lower in these funds than in individual stock investments.
Less expensive
Index funds can be passively managed, and there is no need to spend on market analysts and researchers to predict returns and track performance.
Wider market exposure
A single index fund can diversify a portfolio by investing in various asset stocks across sectors and asset classes.
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Top seven index funds in India
If you are planning to invest in any index fund, then learning about the best funds in this category will help you select a suitable plan for your investment. If you are not thinking about investing currently and are only curious about index funds, it will also help to enhance your knowledge. Below we will discuss seven top index funds in India that you must know.
UTI Nifty 50 index fund
UTI Nifty 50 index fund is one of the top index funds in India at current times. The UTI mutual fund launched this fund on 6th March 2000. Currently, this fund holds the highest AUM, approximately 7,941.05 Cr. INR. It calculates the total returns based on the underlying index. But this calculation of returns can be hindered due to issues like tracking errors.
It also has a lower NAV of 121.08 INR, which ranks lowest in the list. But it takes a higher fee to invest in, which is around 5,000 INR. This index fund scheme offers high returns by imitating the underlying index performance, which is why it is also remarked as one of the best index funds in India. So, if you are looking for an index fund that can offer good returns on your investment, then UTI Nifty 50 index fund can be a good option.
SBI Nifty 50 index fund
Another top index fund in India is the SBI Nifty 50 index fund. This index fund follows the Nifty 50 index and makes investments in the same proportion of the stock as their weightage in the current index. It means this fund will invest in different companies (for instance a, b or c) in a proportion which is same as their weightage in the Nifty 50 index.
SBI nifty 50 index funds not only strictly follow the Nifty 50 index but also replicate its performance to invest and get profit from it. Currently, SBI Nifty 50 holds an AUM of 2,416.93 Cr. INR and NAV of 162.18 INR. It also requires around 5,000 INR to invest in it.
Axis Nifty 50 index fund
Axis Nifty 50 index fund or Axis Nifty 50 index fund -direct growth is another top index fund in India that has recently gotten a lot of attention. Axis Nifty 50 index fund was launched by Axis Mutual Fund. This index fund scheme seeks investment returns post expenses and closely corresponding to the Nifty 50 index all returns. But this scheme also involves issues like tracking errors, similar to UTI nifty 50 index fund.
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Axis Nifty 50 index fund tracks the performance of the Nifty 50 index and imitates it to be in the market and making investments. So, this index fund can be another great option for people who want to invest in Indian Index funds, especially Nifty 50 index-related ones.
UTI Nifty Next 50 Index Fund
Another UTI index fund scheme we mention in India’s top index fund list is the UTI Nifty Next 50 Index Fund launched by UTI Mutual Funds. This index fund was launched on 8th June 2018, eighteen years after the launch of the UTI Nifty 50 index fund. This index fund scheme also corresponds with the Nifty 50 index and calculates all security before expenses. UTI Nifty Next 50 Index Fund currently holds an AUM of 1,863.92 Cr. INR and NAV of 15.83 INR.
HDFC Index Fund Nifty 50 scheme
HDFC Mutual funds launched HDFC Index Fund Nifty 50 scheme on 17th October 2002. This scheme has an AUM of 5,940.60 Cr. INR and NAV of 161.69 INR. The investment fee is 5,000 INR, but if you invest through SIP, you can start investing from 300 INR.
ICICI Pru Nifty Next 50 index fund
Another top Index fund in India is the ICICI Pru Nifty Next 50 Index Fund, launched by the ICICI Prudential mutual funds. This scheme currently holds an AUM of 2,332.48 Cr. INR, NAV of 39.47 INR. The minimum investment charge of the scheme is 100 INR.
ICICI Pru Nifty 50 Index Fund
ICICI Prudential mutual fund provided another large-cap index fund scheme, the ICICI Pru Nifty 50 index fund. This scheme holds an AUM of 3,417.95 Cr INR, and the minimum investment charge is 100 INR.
Conclusion
An index fund is a type of mutual fund that concentrates on indexes like Nifty 50, Nifty 20, Nifty 30, S&P BSE Sensex and others. This kind of mutual fund policy offers lower volatility, higher returns, better portfolio diversification and many more interesting benefits. Here we have discussed the top seven Index funds available in India. We have also covered some essential topics related to index funds, like how does they work, their benefits and much more.
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