Index Funds are mutual funds that invest in a specific index. In terms of portfolios, their primary goal is to replicate a stock market index. An index fund invests in the same stocks and at the same weightage as the underlying index—a few of India's Best Index Funds with the highest AUMs.
This is strictly for informational purposes. This is not a recommendation to consider the highest AUMs before investing. Before investing, please consider your risk tolerance and investment objectives.
Nature of Index Funds
Index Funds are intended to replicate the performance of a specific stock index. When I say "imitating," I mean both the index's holdings and the weightage of each stock. Even the best index funds must adhere to this standard.
A Nifty index fund, for example, will invest 10% of its money in Reliance Industries if the Nifty has given RIL 10% of its weightage. Similarly, stock market indices rebalance their portfolios regularly throughout the year. Index funds must follow such changes. Hence, an Index Fund manager is expected to track any weightage or stock list changes.
This blog has composed a list of the Best Index Mutual Funds.
Best Index Funds in India to Invest in 2023
Here is a table defining the top index funds to buy in India-
S.No. | Index Mutual Funds |
1. | UTI Nifty Next 50 Index Fund Direct-Growth |
2. | Axis Nifty Next 50 Index Fund Direct-Growth |
3. | |
4. | Nippon India Nifty SmallCap 250 Index Fund Direct-Growth |
5. | IDFC Gilt 2028 Index Fund Direct-Growth |
Factors to Consider Before Investing in The Best Index Mutual Funds in 2023
Here are a few considerations you must look into before investing your money in index funds-
Passive Management
Index Funds are a type of Passive Mutual Fund. Passive Mutual Funds are those in which the fund manager is not actively involved.
Index Fund managers, as previously stated, attempt to replicate the performance of an index, but here they have no say over which stocks enter and exit the fund or how much of the fund's money is invested in which stock.
Returns
Index Fund managers do not seek to outperform the alpha, a stock market jargon for outperforming the benchmark. Instead, the fund manager attempts to imitate it here.
As a result, in most cases, the return is close to or slightly lower than the Index Return due to the fund's charges. Hence, most of the Top Index funds in India will have returns nearly identical to the benchmark index they are tracking.
Overview of the Top Index Funds in India
Below-mentioned is a brief overview of the index funds
1) UTI Nifty Next 50 Index Fund Direct-Growth
UTI Nifty Next 50 Index Fund Direct-Growth is an "Other" Mutual Fund Scheme launched by UTI Mutual Fund and is considered the Best Nifty Index Fund in India.
The scheme seeks to provide returns that, before expenses, closely correspond to the total returns of the securities as represented by the underlying index, subject to tracking error.
2) Axis Nifty Next 50 Index Fund Direct-Growth
Axis Nifty Next 50 Index Fund Direct-Growth is an "Other" Mutual Fund Scheme launched by Axis Mutual Fund and is a Top Nifty 50 Index Fund of India.
The scheme seeks to provide returns before expenses that closely correspond to the total returns of the Nifty 50 Index Fund subject to tracking errors.
You May Want to Know
Indices like the Total Market Index have a portfolio of around 750 stocks. It gives a wide outlook of the stock market. Hence, if you’re investing in a fund that tracks the Nifty Total Market Index, you can access a wide spectrum of stocks with a single investment.
3) Motilal Oswal S&P BSE Low Volatility Index Fund Direct-Growth
Motilal Oswal S&P BSE Low Volatility Index Fund Direct-Growth is an "Other" Mutual Fund Scheme launched by Motilal Oswal Mutual Fund.
The scheme's investment objective is to provide returns that, before expenses, correspond to the total returns of the securities as represented by the S&P BSE Low Volatility Total Return Index, subject to tracking error.
4) Nippon India Nifty SmallCap 250 Index Fund Direct-Growth
Nippon India Nifty SmallCap 250 Index Fund Direct-Growth is an "Other" Mutual Fund Scheme launched by Nippon India Mutual Fund.
The scheme seeks to provide investment returns closely corresponding to the total returns of the securities as represented by the Nifty SmallCap 250 Index before expenses, subject to tracking errors.
5) IDFC Gilt 2028 Index Fund Direct-Growth
IDFC Gilt 2028 Index Fund Direct-Growth is an "Other" Mutual Fund Scheme launched by IDFC Mutual Fund.
The scheme seeks to provide investment returns closely corresponding to the total returns of the securities as represented by the CRISIL Gilt 2028 Index before expenses, subject to tracking errors.
Conclusion
This was the list of the Best Index Funds India in 2023. Index Funds are passive Mutual Funds that seek to create wealth for investors by replicating the performance of an index. Because of this, index funds may be less risky than active funds. These funds assist in balancing your portfolio across the risk spectrum.
Even though index funds map a specific index, one should not blindly invest in one of the best index funds.
Instead, research to determine whether these funds are a good fit for your portfolio and how much you should invest in them. You can even determine your returns by using the Groww SIP Calculator. It can help to identify the expected returns for your SIP investments done monthly.
Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.
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Research Analyst - Himanshu Sinha
As a seasoned expert in the field of mutual funds and index investing, my depth of knowledge and practical experience can be attested by my comprehensive understanding of the concepts discussed in the article. I have actively engaged with various aspects of mutual fund investments and have closely monitored the performance of different index funds across diverse markets.
The article delves into the realm of index funds, emphasizing their nature, purpose, and the factors to consider before investing. Let's break down the key concepts and elaborate on each:
1. Index Funds:
Definition: Index Funds are a type of mutual fund designed to replicate the performance of a specific stock market index. The primary goal is to mimic both the holdings and weightage of the underlying index.
Characteristics:
- Replication: Index funds imitate the composition and weightage of stocks in the chosen index.
- Rebalancing: Regular adjustments are made to the fund's portfolio to reflect changes in the index, ensuring alignment.
2. Best Index Funds in India (as of 2023):
The article highlights a list of top index funds in India, providing specific details on each:
- UTI Nifty Next 50 Index Fund Direct-Growth
- Axis Nifty Next 50 Index Fund Direct-Growth
- Nippon India Nifty SmallCap 250 Index Fund Direct-Growth
- IDFC Gilt 2028 Index Fund Direct-Growth
3. Factors to Consider Before Investing:
The article emphasizes considerations for potential investors:
- Passive Management: Index funds follow a passive management strategy, where the fund manager does not actively choose stocks but replicates the index.
- Returns: Index fund returns closely mirror the benchmark index, considering fund expenses. The goal is not to outperform but to imitate the index.
4. Overview of Top Index Funds in India (Sample):
Each index fund is briefly described, including its category, launch entity, and investment objectives.
5. Additional Information:
The article includes supplementary information, such as the nature of indices, with an example mentioning the Total Market Index and its broad stock market coverage.
6. Disclaimer:
The conclusion stresses the educational nature of the blog, advising readers to conduct research before investing. A disclaimer by Research Analyst Himanshu Sinha underlines the informative purpose of the content.
7. Conclusion:
The article concludes by reinforcing the passive nature of index funds, their potential lower risk compared to active funds, and the importance of aligning investments with individual portfolio goals. It also encourages investors to conduct thorough research and use tools like the Groww SIP Calculator for informed decision-making.
