index fund india

Index Fund India: Should You Jump In On The Action?

Investing is the best way to earn a bit more monthly by trading shares and assets on the market. For most experienced investors, index mutual funds became their first investments because they have a low barrier to entry. 

India has recently grown its GDP by 17.6% from 2020 to 2021. Many experts consider this a great increase, attracting many international investors to invest in Indian funds and properties.

Even the best index funds in India require you to pay only Rs100 to Rs5,000 to start investing and earning. Here’s everything you need to know about index funds.

What is an Index Fund?

An index fund is an investment containing multiple stocks that track an index or measure of the market. One of the most popular indexes in India is the Nifty 100, which is the equivalent of America’s S&P500 index that tracks its top 100 companies.


Why Should You Invest In Index Funds?

Investing in index funds is a simple way to diversify your portfolio and reduce risk. Plus, it’s compatible with both aggressive and conservative investors. Index funds are low-cost investments that can benefit you with a higher return in the long term.

Advantages of Investing in Index Funds

Index funds are among the best tools an investor has to grow their assets because of the following benefits.

Less Influence From Management

The fund manager is not responsible for the investment decisions. The decision-making process is always based on an index. For as long as a company is an approved member of that index, it will remain in the fund.

Fewer Expenses

The expense ratio is the percentage of all assets spent on operating expenses, administrative, and management costs. The lower the cost, the higher the return on investment.

Diversified Investments

Index funds hold a large number of stocks or market-based assets. This can make it more likely that an index fund will not drop in value in the event of a market crash and lose money.

Things To Consider Before Investing in Index Funds

Before investing in index funds, make sure you consider the following aspects to avoid risking too much and fully understand your appetite for aggressive indexes.

Tolerance For Risk

One of the first things to consider is whether or not you are willing to risk a significant amount of money on your investment. Typically, index funds do not provide an investor with much upside potential. However, if you are willing to take on some risk, these funds can help diversify and lower volatility across your investments.

Potential For Returns

If you are willing to take on some risk, then you might also be willing to accept the possibility of a return. Usually, index funds offer lower returns than actively managed mutual funds, but they typically provide lower risk than other investment vehicles.

Investment Costs

Index funds typically offer lower fees than actively managed mutual fund investments but avoid mutual funds that charge front-end loads or back-end loads. As with any investment, you should decide how much risk you are willing to bear and the potential return that can be expected.

Time Horizon 

This is the timeframe an investor has allocated to an investment goal. It is important when making investment decisions because it will dictate the appropriate type of investment. For example, if a person requires an income stream in three years, investing in a stable company that provides consistent returns would be better than investing in emerging technology with no guarantees.

digital rupee concept background with rupee symbol

Who Should Invest in an Index Fund?

Index funds are broadly diversified, low-cost, and the most efficient way to invest. They are appropriate for investing for the long term, including those who do not have time to research individual stocks. Investors taking broad market exposure can use index funds to minimize the risks of unmanaged investments in the stock market without the expense and management fees associated with actively managed funds.

10 Best Index Funds in India for 2022 

If you’re looking to expand your investment portfolio into the Indian market, here are the top index funds you should consider. These index funds in India play along with the market risks of most index-tracked mutual funds.

Mutual Fund 5-Year Returns 3 Year Returns Minimum Investment
Sundaram Smart Nifty 100 Equal-Weight Direct N/A 16.19% Rs5,000
ICICI Prudential Sensex Index Fund – Direct N/A 15.25% Rs100
DSP Equal Nifty 50 Fund – Direct Plan-Growth N/A 15.2% Rs500
IDFC Nifty Fund-Growth Direct Plan 14.06% 15.19% Rs5,000
Nippon India Index Fund – Sensex Direct-Growth Plan 14.55% 15.2% Rs5,000
HDFC Index Fund – Sensex Direct-Growth Plan 14.5% 15.09% Rs5,000
ICICI Prudential Nifty Index Fund – Direct Plan 13.73% 15.01% Rs100
ICICI Prudential Sensex Index Fund N/A 15.03% RS100
UTI Nifty Index Fund – Direct-Growth Plan 13.95% 15.01% Rs100
LIC MF Index Fund Sensex Plan – Direct Plan 14.1% 14.95% Rs5,000

1. Sundaram Smart Nifty 100 Equal-Weight Direct

Investors looking to invest in the constituents of NIFTY 100 Equal Weighted Index will find this index fund suitable for their needs. This is a “Smart Beta Fund,” a great alternative to traditional index funds because it can outperform index funds using AI technology despite being passively managed and rebalanced. The Sundaram Smart NIFTY 100 Equal-Weight Direct is still an investment for high-risk investors.

2. ICICI Prudential Sensex Index Fund – Direct

This index fund follows the BSE Sensex Index, which is a measure of the performance of 30 major companies in the Indian stock markets. The value of the Sensex index is determined by adding up the values of all 30 stocks. The stocks are weighted according to their relative importance to come up with an index value. The value is also adjusted for any stock splits and dividends. ICICI Prudential strictly follows this index without assurance of any return–only performance.

3. DSP Equal Nifty 50 Fund – Direct Plan-Growth

The DSP Equal Nifty 50 Fund tracks the performance of the Nifty 50 Equal Weight Total Return Index, which is its underlying index. It contains equities, debts, and cash and cash equivalents. Plus, it follows market capitalizations in giant and large-cap companies 100% of the time.

4. IDFC Nifty Fund-Growth Direct Plan

The IDFC Nifty Fund invests in large-cap companies, which explains its longer time horizon and large minimum investment. This gives them a lower risk profile than most index funds, making them appealing to conservative investors. The fund has a 5-year minimum maturity period before investors can redeem their investments and invests in finance, tech, energy, consumer goods, and automobile sectors.

5. Nippon India Index Fund – Sensex Direct-Growth Plan

This index fund aims to replicate the performance of the BSE Sensex Index but with a long-term position and higher minimum investment than its peers. It has an annualized return of 8.9% since launch. It follows India’s top 30 major stock companies.

6. HDFC Index Fund – Sensex Direct-Growth Plan

The HDFC Index Fund – Sensex Direct-Growth Plan uses the BSE Sensex as its benchmark index. It has a short and long-term position available and focuses on 30 of India’s best stock companies. It requires a minimum investment of Rs5,000. Despite its long-term position, it has a relatively high-risk profile.

7. ICICI Prudential Nifty Index Fund – Direct Plan

ICICI Prudential has its own index fund focused on the Nifty 50 and currently has a net value of Rs168 million. The Nifty 50 focuses on 50 of India’s top companies, and this index mutual fund tracks their performance closely, subject to minor errors. The fund has a moderately-high risk profile, which guarantees better exposure with zero assurances for high returns.

8. ICICI Prudential Sensex Index Fund

The ICICI Prudential Sensex Index Fund Direct comes from the company itself. This version is sold by representatives and financial advisers, who can then help investors make their investments grow. The ICICI Prudential Sensex Index Fund follows the BSE Sensex Index, which is subject to errors.

9. UTI Nifty Index Fund – Direct-Growth Plan

The UTI Nifty Index Fund is an index fund that tracks the Nifty 50 Index, meaning it invests in 50 of the most valuable stocks in India. The UTI Nifty Index Fund invests in securities that comprise the index. It seeks to provide exposure to the Indian equity market, particularly to companies with a low cost of debt and has a low level of risk.

10. LIC MF Index Fund Sensex Plan – Direct Plan

The LIC MF Index Fund Sensex Plan is a mutual fund that invests in a portfolio of stocks and shares traded on the Indian stock exchanges. The mutual fund’s objective is to expose investors to the Indian stock market with a diversified portfolio of Indian stocks. Most experts view the index fund as having high volatility and risk level.

How Do You Start Investing in Indian Index Funds?

Most Singaporean brokers offer most of the best index fund investments we’ve listed above. Make sure to look into their selections. Next, you’ll need to follow their registration and deposit guidelines before you can start investing in your favorite Indian funds.

Find out which is better for investment? ETF vs Index fund.

Our Final Thoughts

India’s economic growth may rise or dwindle in the coming years. However, with Indian index funds, you’ll surely be part of its progressive growth in the best possible way. Get started investing with these top 10 best Indian index funds, too.

Key Takeaways

  • India’s GDP has grown by 15% and beyond, creating a ripe environment for local and international investment
  • Indian index funds are the best way to pool your cash with other investors and purchase shares from India’s top companies from its Nifty 100, Nifty 50, and BSE Sensex Indexes
  • Index funds reduce management expertise leveraging in favor of objective index tracking with minimal errors. 
  • Get started investing in Indian index funds using your favorite SG-based brokers today.

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