Best Index Mutual Funds in India
List of the top-performing Index funds sorted by returns with their AUM and Expense Ratio.
List of Best Index Funds
Compare Fund Performance across different time periods. Click column headers to sort.
What is an Index Fund?
Index funds are mutual funds that follow an Index. For example, the Navi Nifty 50 Index Fund tracks the Nifty 50 Index. Similarly, the ICICI Prudential BSE Sensex fund mirrors the Sensex Index. This means that these fund invests in all the companies in the Nifty 50 Index and the Sensex, respectively.
These indices serve as a benchmark for mutual funds. In this example, the objective of the Navi Nifty 50 Index Fund is to track the Nifty 50 Index's holdings and performance as closely as possible. Unlike other mutual funds, these funds do not aim to beat the benchmark index; they just try to mirror the index's returns accurately.
AUM Growth of Index Mutual Funds - December 2025
In the past one month, the Motilal Oswal BSE Enhanced Value Index Fund Direct Growth has emerged as the leader in net AUM growth, witnessing an impressive addition of ₹93.25 crore. This positions it as one of the top-performing Index mutual funds in terms of investor interest and fund growth.
Fund | 1M Net Flow | 1M Net Flow % | |
|---|---|---|---|
 Motilal Oswal BSE Enhanced Value Index Fund Current AUM: 1.04K Cr | +₹93.25 Cr | 11.81% | Invest |
 Bandhan Nifty100 Low Volatility 30 Index Fund Current AUM: 1.84K Cr | +₹68.74 Cr | 4.07% | Invest |
Motilal Oswal Nifty India Defence Index Fund Current AUM: 3.89K Cr | +₹58.04 Cr | 1.70% | Invest |
 Edelweiss Nifty500 Multicap Momentum Quality 50 Index Fund Current AUM: 419.65 Cr | +₹47.53 Cr | 14.68% | Invest |
Edelweiss Nifty Midcap150 Momentum 50 Index Fund Current AUM: 1.29K Cr | +₹40.88 Cr | 3.57% | Invest |
Top Stock added by Index Mutual Funds - December 2025
Over the last month, TML Commercial Vehicles Ltd has been added to the portfolios of 3 out of 138 Index mutual funds. This signals growing confidence in the stock’s long-term growth prospects among Index fund managers.
Top Stock sold by Index Mutual Funds - December 2025
In contrast, Dhani Services Ltd has been sold by 5 of 138 Index mutual funds in the last one month. This shift underscores a cautious approach by fund managers toward the stock, reflecting changing market dynamics.
Sector allocation of Index mutual funds - December 2025
Over the last 6 months, Index category has seen increased allocation towards Financial Services, Basic Materials, Industrial sectors and allocation in Real Estate sectors has decreased
Sector | AUM |
|---|---|
 Financial Services Increased by 53.53%, in last 6M | 9.47K Cr |
 Industrial Increased by 29.42%, in last 6M | 6.94K Cr |
 Tech Increased by 17.08%, in last 6M | 4.7K Cr |
 Consumer Cyclical Increased by 16.89%, in last 6M | 4.58K Cr |
 Basic Materials Increased by 38.57%, in last 6M | 4.3K Cr |
 Health Increased by 20.56%, in last 6M | 3.55K Cr |
 Consumer Defensive Increased by 18.95%, in last 6M | 2.46K Cr |
 Energy Increased by 22.63%, in last 6M | 2K Cr |
 Communication Increased by 1.75%, in last 6M | 885.2 Cr |
 Utilities Increased by 21.76%, in last 6M | 835.41 Cr |
 Real Estate Decreased by 8.01%, in last 6M | 392.5 Cr |
What are the types of Index Funds?
There are multiple types of Index funds. Indexes are created based on their market cap, sector, broader market, and more. Here are the top types of Index funds that you will come across:
1. Broader Market Index Funds
Broader market index funds represent a segment of the total stock market. For example, the Navi Nifty 50 Index Fund tracks the top 50 companies of India by their market capitalization. Similarly, Nippon India Nifty 500 Momentum Fund tracks the top 500 companies of India that are showing price momentum. These funds represent how the overall market across different sectors is doing.
2. Market Capitalization Index Funds
Index funds are also categorized on the basis of their market cap. This includes large-cap, small-cap and mid-cap companies. For example, HDFC Nifty Smallcap 250 Fund matches the performance of the NIFTY Smallcap Index which includes companies ranked from 251st and beyond on the stock exchange.
3. Sectoral Index Funds
Indexes are further segmented into different sectors. This includes indexes like Banking, Financials, IT, Healthcare, etc. So, for example; Axis Nifty IT Index Fund tracks the NIFTY IT index. This index includes all IT companies and represents how IT companies are performing as a whole.
4. Equally Weighted Index Funds
Index funds are also categorized by their weight. Usually, allocations in these indexes are based on their weighted market cap. With an equally weighted approach, all stocks in the index have equal allocation, ensuring a more diversified and balanced approach.
Benefits of Investing in an Index Mutual Fund
There are several benefits of investing in an index mutual fund. Some of which are:
Market Exposure
When you invest in an index fund, your portfolio is exposed to the broader market. This essentially means that you get exposure to top companies in India. If you invest in a Nifty 500 index fund, you are indirectly investing in the top 500 companies. Similarly, say you invest in an IT Index Fund, you are then investing in the top IT companies of India.
Cost Efficiency
Index funds are a cost-effective way to invest. You can start with as little as ₹500 through SIP or lump sum investments. Instead of buying individual stocks, you invest in a basket of companies through a single fund. Plus, the expense ratio is significantly lower compared to actively managed mutual funds, ensuring better long-term returns
Long-term Growth
Since index funds mirror the overall market, they benefit from the long-term growth of the economy. Over time, markets tend to rise, making index funds an ideal choice for wealth creation. Patience rewards investors with steady, compounded growth.
Diversification
By investing in multiple companies through an index fund, you minimise the impact of individual stock volatility. Diversification helps balance out risks and protects your portfolio from major market fluctuations.
Risks of Index Mutual Funds
As an investor, you must also be aware of the risks associated with Index Funds. Some of which include:
Market Risk
Index funds are designed to mirror the performance of the market. But when the market takes a downturn, these returns also dip. Since stock markets go through inevitable highs and lows, investing in an index fund means you need to be prepared to face the risk of downturns.
Portfolio Concentration
Many index funds, especially those tracking market-cap-based or sector-specific indices, tend to have a heavy concentration in certain sectors. This lack of diversification can expose your portfolio to higher risks if those sectors or stocks underperform.
Lack of Flexibility
Unlike actively managed funds, index funds passively follow their benchmark and cannot adjust their holdings during market volatility. This means they can’t take defensive positions or capitalize on market opportunities, leaving your investment exposed to broader market trends.
Tracking Error
Although index funds aim to replicate the performance of their underlying index, factors such as fund expenses, rebalancing delays, and dividend reinvestment may cause slight deviations in returns, known as tracking error. Over time, even small deviations can affect overall performance.
Should I Invest in an Index Fund?
Index funds are an appropriate choice for investors who want returns in line with an Index. Whether you should invest in an Index fund or not depends on your investment goals. Investors who invest in index funds often have these characteristics:
1. You are a passive investor
If you are new to investing and do not want to individually pick stocks or rely on a fund manager. Following an index might work better. It is a passive investment approach that follows the set it and forget it strategy.
2. You are risk-averse
If you have low risk tolerance and do not want to invest in funds that are volatile and risk your capital, a passive approach like index investing might work well.
3. You want market-average returns
When you aim to get returns that align with the market. You do not aim for market-beating returns but are satisfied with stable market-average returns; index funds may be a good fit.
Frequently Asked Questions
Can you SIP in an Index Fund?
Yes, you can SIP in an index fund. You can do this easily on INDmoney. From daily, weekly, or monthly frequencies, set a SIP in an index fund.
Is SIP in an Index Fund taxable?
Yes, any gain from an index fund is taxable. Your tax treatment would depend on how long you have held the fund for. If you sell your investment within 12 months, it is treated as Short-term Capital Gain (STCG). When you sell your investments after 12 months, it is treated as Long-term Capital Gain (LTCG).
Why are Index Funds are considered less risky than many other equity funds?
Index funds mirror a benchmark like Nifty 50 or Sensex. Since they do not make active stock picks and simply hold the same stocks in the same proportion as the index, the portfolio stays broad and diversified. This reduces fund manager related risk and limits sudden performance swings. That is why index funds often feel steadier compared to actively managed equity funds.
Do Index Funds perform well during market corrections?
Index funds reflect the market exactly. They fall when the market falls but they also recover with the market without any delay. Since there is no stock picking risk, many investors prefer them during volatile phases because the fund will never make concentrated bets that can worsen the downside.
How frequently do Index Funds rebalance their holdings?
Rebalancing follows the schedule of the underlying index. Whenever the index adds or removes stocks, the fund adjusts its portfolio accordingly. This is why holdings stay aligned with the benchmark at all times.
Should I invest in multiple index funds tracking different indices?
It depends on your diversification needs. A mix of large cap, mid cap and global index funds can broaden your portfolio. At the same time, holding too many funds tracking the same index does not add value. One well chosen fund per index is usually enough.
Why do Index Funds sometimes show lower long term returns than active mutual funds?
Index funds are designed to match the index, not beat it. Over long periods, some active funds may outperform due to superior stock selection. However, many active funds also underperform the index. Index funds remove the uncertainty of manager performance and deliver returns that closely follow the benchmark, which is why many investors prefer them for long term wealth building.
Why is the expense ratio of Index Funds generally lower than other equity mutual funds?
Index funds have a simple job. They only track an index and do not engage in research driven stock picking. This reduces fund management costs. As a result, the expense ratio is typically much lower than that of actively managed equity funds. This cost advantage often becomes meaningful over many years.
How should I decide the ideal allocation to Index funds in my portfolio?
A simple starting point is to keep index funds as the core of your equity exposure since they offer broad diversification at a low cost. Many investors choose to allocate fifty percent or more to index funds, then add active funds or thematic strategies depending on risk appetite. Your exact mix should reflect your time horizon, risk comfort and how much volatility you are prepared to handle.
Why do returns differ between two Index Funds that track the same benchmark?
Small differences can come from tracking error, which is the gap between the fund’s performance and the index. Tracking error depends on cash holdings, rebalancing practices, fund size and expense ratio. Lower tracking error usually means the fund stays closer to the index’s actual returns.
If Index Funds simply copy an index, why should I compare them? Aren’t they all the same?
Not entirely. While the portfolio is similar, each fund house may differ in tracking error, AUM size, liquidity, and the expense ratio. These factors affect your long term outcome. Choosing a fund with low cost and low tracking error generally leads to a smoother investment experience.
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