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Index Funds

Index funds replicate stock market indices, aiming to mirror their performance. These funds are passively managed and require minimal effort in your...

Index funds replicate stock market indices, aiming to mirror their performance. These funds are passively managed and require minimal effort in your portfolio. These are relatively less volatile and risky than active funds, making them ideal for long-term investments.

List of Best Index Funds in India

Fund Name
AUM
3Y Returns
NAV

About Index Mutual Funds

Index mutual funds are passively managed funds that aim to track the performance of a market index such as the NIFTY 50, NIFTY Next 50, or Sensex. Instead of selecting stocks actively, these funds replicate the index by investing in the same stocks in the same proportion. 

Unlike actively managed funds, where fund managers frequently buy and sell securities to outperform the market, index funds simply aim to match the index’s performance. Because of this passive approach, they usually have lower management fees and transaction costs. 

Index mutual funds provide broad market exposure and are often considered suitable for investors looking for a low-cost, long-term investment option. 

How Do Index Funds Work? 

Index funds are designed to replicate the performance of a specific stock market index. Instead of actively selecting stocks, the fund invests in the same securities that make up the index and in the same proportion. This helps the fund mirror the index’s performance as closely as possible. 

Because of this structure, the Net Asset Value (NAV) of an index fund generally moves in line with the index it tracks. For example, if the index rises by 10%, the index fund’s NAV will typically increase by a similar percentage. Likewise, if the index falls, the fund’s value may also decline. 

Key Features of Index Funds 

  • Lower Costs: Since index funds follow a passive strategy and require minimal active management, their expense ratios are generally lower than those of actively managed mutual funds. 

  • Market-linked Returns: Returns depend on the performance of the underlying index rather than fund manager decisions. 

  • Tracking Error: This measures how closely the fund follows its benchmark index. A lower tracking error indicates better replication of the index. 

  • Long-term Investment Approach: Index funds are typically suited for long-term investors, as market indices may experience short-term fluctuations. 

Top 10 Index Mutual Funds to Invest in 2026

Name AUM (₹ Cr) 1 Yr Return (%) 3 Yr CAGR (%) Expense Ratio (%)
Motilal Oswal BSE Enhanced Value Index Fund 1,282.55 30.72 35.44 0.37
ICICI Pru NASDAQ 100 Index Fund 2,620.60 18.73 30.26 0.61
ICICI Pru Nifty Auto Index Fund 194.03 18.60 27.48 0.40
Axis Nifty Midcap 50 Index Fund 583.71 14.08 25.30 0.25
Edelweiss Nifty Midcap150 Momentum 50 Index Fund 1,406.61 7.35 25.04 0.43
Tata Nifty Midcap 150 Momentum 50 Index Fund 1,043.79 7.38 24.61 0.44
Aditya Birla SL Nifty Smallcap 50 Index Fund 255.98 0.45 24.27 0.48
Axis Nifty Smallcap 50 Index Fund 549.76 0.30 24.23 0.27
Motilal Oswal Nifty Midcap 150 Index Fund 3,023.23 11.25 24.10 0.26
Aditya Birla SL Nifty Midcap 150 Index Fund 426.23 10.92 24.01 0.40

Note: The data above is as of Feb 9, 2026, and is sorted and ranked as per 3-year CAGR.

Motilal Oswal BSE Enhanced Value Index Fund

The expense ratio of the fund is 0.37%. The fund is managed by the Motilal Oswal Mutual Fund investment team. The investment objective of the scheme is to replicate the performance of the BSE Enhanced Value Index by investing in value-oriented stocks that form part of the index, subject to tracking error.

ICICI Pru NASDAQ 100 Index Fund

The expense ratio of the fund stands at 0.61%. The scheme is managed by the ICICI Prudential Mutual Fund investment team. The investment objective is to generate returns in line with the NASDAQ-100 Index by investing in companies listed on the NASDAQ exchange, thereby providing exposure to global technology and growth companies.

ICICI Pru Nifty Auto Index Fund

The expense ratio of this fund is 0.40%. The scheme is managed by the ICICI Prudential Mutual Fund investment team. The fund aims to track the performance of the Nifty Auto Index by investing in automobile and auto-component companies included in the index.

Axis Nifty Midcap 50 Index Fund

The fund carries an expense ratio of 0.25%. It is managed by the Axis Mutual Fund investment team. The investment objective is to replicate the performance of the Nifty Midcap 50 Index and provide investors exposure to leading mid-cap companies.

Edelweiss Nifty Midcap150 Momentum 50 Index Fund

The expense ratio of the scheme is 0.43%. The fund is managed by the Edelweiss Mutual Fund investment team. The investment objective is to track the Nifty Midcap150 Momentum 50 Index by investing in mid-cap stocks selected based on momentum factors.

Tata Nifty Midcap 150 Momentum 50 Index Fund

The expense ratio for the fund is 0.44%. The scheme is managed by the Tata Mutual Fund investment team. The investment objective is to mirror the performance of the Nifty Midcap 150 Momentum 50 Index by investing in mid-cap stocks exhibiting strong momentum characteristics.

Aditya Birla SL Nifty Smallcap 50 Index Fund

The fund has an expense ratio of 0.48%. It is managed by the Aditya Birla Sun Life Mutual Fund investment team. The investment objective is to track the Nifty Smallcap 50 Index and provide exposure to small-cap companies with growth potential.

Axis Nifty Smallcap 50 Index Fund

The expense ratio of the fund is 0.27%. The scheme is managed by the Axis Mutual Fund investment team. The objective of the fund is to generate returns in line with the Nifty Smallcap 50 Index by investing in small-cap stocks forming part of the benchmark.

Motilal Oswal Nifty Midcap 150 Index Fund

The expense ratio of this fund stands at 0.26%. The fund is managed by the Motilal Oswal Mutual Fund investment team. The investment objective is to replicate the performance of the Nifty Midcap 150 Index and provide diversified exposure to mid-cap companies.

Aditya Birla SL Nifty Midcap 150 Index Fund

The fund carries an expense ratio of 0.40%. It is managed by the Aditya Birla Sun Life Mutual Fund investment team. The investment objective is to track the Nifty Midcap 150 Index and generate returns corresponding to mid-cap stock performance, subject to tracking error.

urns corresponding to mid-cap stock performance, subject to tracking error.

Sector Allocation of Index Mutual Funds – March 2026 

Over the last six months, index mutual funds have seen higher allocations to sectors such as Consumer Cyclical, Utilities, Financial Services, and Energy. At the same time, allocations to Technology and Healthcare have declined slightly. This reflects the changing composition and performance of the underlying indices tracked by these funds. 

Sector-wise allocation (as of 12 March 2026): 

  • Financial Services: ₹10.96K Cr (↑ 29.72% in the last 6 months) 

  • Industrial: ₹7.07K Cr (↑ 8.63%) 

  • Consumer Cyclical: ₹5.88K Cr (↑ 45.48%) 

  • Basic Materials: ₹4.63K Cr (↑ 14.74%) 

  • Technology: ₹4.07K Cr (↓ 6.43%) 

  • Healthcare: ₹3.14K Cr (↓ 2.88%) 

  • Consumer Defensive: ₹2.47K Cr (↑ 4.15%) 

  • Energy: ₹2.28K Cr (↑ 28.75%) 

  • Utilities: ₹1.02K Cr (↑ 34.39%) 

  • Communication: ₹970.77 Cr (↑ 6.93%) 

  • Real Estate: ₹389.76 Cr (↑ 0.52%) 

Since index funds track market indices, sector allocation changes over time based on the index composition and market performance of different sectors. 

Who Should Invest in Index Funds?

Index funds may be suitable for the following types of investors: 

  • Long-term investors: Individuals who want to stay invested for a longer period and benefit from overall market growth. 

  • Cost-conscious investors: Those looking for investment options with lower expense ratios compared to actively managed funds. 

  • Passive investors: Investors who prefer a simple, hands-off investment approach that tracks market performance instead of relying on active stock selection. 

How To Invest in Index Funds on Angel One? 

Investing in Index Funds is hassle-free through your Angel One account. You just have to follow these steps:  

Step 1: Log in to your Angel One account using your registered mobile number. Validate the OTP and finally enter your MPIN.  

Step 2: Determine the most-suited fund based on your needs and risk profile. You can evaluate each fund under the mutual fund section on the Angel One app. Things to consider at this stage are: 

  • Search for the fund you want to invest in or take cues from funds listed by Angel One across categories. 

  • Analyse the fund’s past performance, tax incidence, constituent sectors and stocks. 

  • Calculate the potential returns using the calculator. 

  • Evaluate the fund’s level of risk and weigh it against your risk tolerance. 

  • Check the fund’s ratings given by reputed rating agencies. Generally, the ratings range from 1 to 5. 

  • Consider the fund’s expense ratio to get an idea about the cost of investing in it. 

Step 3: Once you finalise the fund(s) you want to invest in, open your Angel One account, go to the Mutual Funds section, and look for it. Since this can be a long-term investment, be careful when choosing the fund that you would like to invest in. At this stage, consider the following: 

  • Decide whether you want to invest in a lump sum or via a monthly SIP. 

  • Next, enter the amount you want to invest and choose how you want to make the payment. UPI is the preferred mode. Alternatively, you can choose net banking. 

  • After placing the order, in the case of the SIP route of investment, you can create a mandate to make hassle-free future instalments. 

Note: If you do not have an Angel One account, you can easily create one online by completing the required KYC process and submitting the necessary documents. 

Advantages of Investing in Index Funds

Index funds offer several benefits for investors looking for a simple and cost-effective way to invest in the stock market. 

  • Lower Costs: Since index funds follow a passive investment strategy and simply replicate a benchmark index, they usually have lower expense ratios compared to actively managed funds. 

  • No Fund Manager Bias: Index funds follow a predefined index, which removes the impact of subjective stock selection or fund manager decisions. 

  • Diversification: By tracking a market index, these funds provide exposure to multiple companies across sectors, helping reduce concentration risk. 

  • Market-Linked Returns: Index funds aim to mirror the performance of the underlying index, allowing investors to participate in overall market growth. 

  • Simple Investment Approach: With a rule-based investment strategy and minimal portfolio changes, index funds offer a straightforward and easy-to-understand investment option. 

Factors To Consider Before Investing in Index Funds 

Before investing in index funds, investors should evaluate a few key factors to ensure the investment aligns with their financial goals and risk tolerance. 

  • Investment Horizon: Index funds are generally better suited for long-term investors, as markets may experience short-term volatility but tend to grow over time. 

  • Risk Tolerance: Since index funds track market indices, their performance is directly linked to market movements. Investors should ensure they are comfortable with potential market fluctuations. 

  • Tracking Error: This measures how closely the fund replicates its benchmark index. A lower tracking error indicates the fund is closely matching the index performance. 

  • Expense Ratio: Even though index funds usually have lower costs, it is still important to compare expense ratios across funds, as fees can affect long-term returns. 

  • Underlying Index: Different index funds track different indices such as NIFTY 50, Sensex, or NIFTY Next 50. Investors should understand the composition and sector exposure of the index before investing. 

Taxability of Index Funds 

The taxation of index funds in India depends on the holding period of the investment. Since most index funds invest primarily in equities, they are generally taxed as equity mutual funds. 

  • Short-Term Capital Gains (STCG): If index fund units are sold within 1 year, the gains are taxed at 20%. 

  • Long-Term Capital Gains (LTCG): If units are held for more than 1 year, gains above ₹1.25 lakh in a financial year are taxed at 12.5%. 

  • Dividend Taxation: Dividends received from index funds are added to the investor’s total income and taxed according to the applicable income tax slab. 

Investors should consider the tax implications and holding period when planning their index fund investments. 

Index Funds FAQs

Index funds usually mirror the performance of an index. Hence, they do see drops in times of crisis in the sector or the economy.
Index funds offer a good opportunity to diversify your portfolio, allowing a portion of your corpus of funds to be invested rather passively.
There is no particular expected return of index funds in general, as their performance depends on the index that they are tracking. So, an index tracking small-cap stocks may have a vastly different expected return from an index fund tracking a sectoral index.
The primary risk involved in index funds is market risk i.e. the risk of a fall in the share prices of the stocks it follows. Such a situation often arises not just during minor ups and downs but also during economy-wide recessions.
The income from index funds is taxable - however, the stage at which it is taxed and the taxable amount vary based on the time of withdrawal and the tax bracket of the investor.
The exact amount of investment in index funds depends on the total corpus of funds you plan on investing into stocks/FDs/Mutual funds and the level of risk that you are willing to take.
The best index fund depends on your financial goals, risk tolerance, and the market index you want to track. Popular choices include funds that track the NIFTY 50 or Sensex, offering broad market exposure.
Yes, index funds may pay dividends if the underlying stocks in the index distribute dividends. You can either receive them as payouts or have them reinvested in the fund.
Index funds offer diversification and lower risk compared to individual stocks, making them a comparatively safer option for long-term investors. However, if you're prepared to assume greater risk and actively manage your portfolio, individual stocks may offer larger potential profits.
Index funds are best suited for long-term investments, typically 7 years or more. Staying invested for this period helps you benefit from market growth and smooth out short-term fluctuations.
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