Nifty Index Funds are index funds that primarily invest in stocks that form part of the Nifty index. These are passively managed funds. The investment in stocks is also made in the same proportion as in the index. These funds do not aim to beat the indices like Nifty 50 or Sensex but to mirror the index performance.
Index funds are increasingly preferred by many investors because of the low management fees, as these do not require fund managers to design strategies on stock selection.
Here, we will learn some basics of index funds and also some top-performing Nifty index funds to invest in.
What are Index Funds?
An index fund is a type of mutual fund in which the portfolio is constructed to match the components of a market index, such as the Nifty 50. An index fund provides broader market exposure, has low operating expenses, and also minimal portfolio turnover.
Index funds adopt a passive investment strategy as they seek to match the risk and return profile of the market. The theory that index funds follow in the long-term is that the market will outperform any individual stock investment.
What are the benefits of investing in Nifty Index Funds?
Here are some benefits offered by Nifty Index fund investments:
- Index funds follow passive investment strategy and therefore replicate the index constituents. This way, the portfolio mix is simple and also easier to monitor as compared to individual stock investments.
- These involve far lesser cost as compared to other mutual funds since there is no need for active management around stock-selection strategies.
- Nifty index funds have historically generated healthy returns in the long term. The NSE Nifty index base year is 1995 and has seen 11-fold returns in the past 23 years. This means an index fund following Nifty would have made similar returns in those years.
- The Nifty is well tracked and offers a macro view that is based on historical data. This is much easier to follow as compared to specific stock performance.
- Index funds may also overcome the selection bias, since the portfolio composition is not at the discretion of fund managers. Since index funds are passive funds, these just track the index.
Top Nifty Index Funds to invest in 2023
Mentioned below are some top Nifty index funds in India:
Aditya Birla Sun Life Nifty 50 Index Fund Growth
About the fund
This is an open-ended equity scheme tracking Nifty 50 TRI. This is a passively managed fund that aims to provide returns which closely correspond to the returns of the Nifty. This fund option is rated as very high risk and it requires a minimum SIP investment of Rs. 1,000.
| Inception Date | 18th September 2002 |
| Benchmark Name | Nifty 50 TRI |
| Fund Manager | Mr. Lovelish Solanki |
| Expense ratio | 0.60% |
| Fund type | Open-ended |
| Risk | Very high |
Historical Returns of the Fund (annualised)
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 14.48% | 6.26% | 16.06% | 12.88% | 12.30% |
HDFC Index Nifty 50
About the fund
HDFC Index Nifty 50 invests 99.99% of its funds in Indian stocks. It is ideal for investors who are looking for long-term capital growth. Investment is concentrated in equity instruments of Nifty 50 TRI index stocks and is subject to tracking error.
| Inception Date | 17th July 2002 |
| Benchmark Name | Nifty 50 TRI |
| Fund Manager | Mr. Arun Agarwal |
| Expense ratio | 0.40% |
| Fund type | Open-ended |
| Risk | Very high |
Historical Returns of the Fund (annualised)
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 14.60% | 6.49% | 16.25% | 13.37% | 12.95% |
Motilal Oswal Nifty 50 Index Fund Regular Growth
About the fund
Motilal Oswal Nifty 50 Index Fund Regular Growth invests its funds in Indian stocks and debt. It is ideal for investors who are looking for long-term capital growth. Investment is concentrated in equity instruments of Nifty 50 TRI index stocks and is subject to tracking error.
| Inception Date | 23rd December 2019 |
| Benchmark Name | Nifty 50 TRI |
| Fund Manager | Mr. Swapnil Mayekar |
| Expense ratio | 0.50% |
| Fund type | Open-ended |
| Risk | Very high |
Historical Returns of the Fund (annualised)
| 6-month | 1-Year | 3-Year | 5-Year | 10-Year |
| 14.56% | 6.35% | – | – | – |
How to Invest in Nifty Index Funds?
Investors can easily invest in the best Nifty index funds through the Fisdom app. Here are the steps to be followed:
- Download and launch Fisdom app on your smartphone.
- Choose Équity on the home screen and click on ‘Index’ option in the next step
- Tap on ‘invest’ against the selected fund option from the list
- Choose either ‘SIP’ or ‘Lump-sum’ investment and enter the amount of investment
- Provide your basic details as directed by the app
- Complete the payment procedure to start your investment
End Note
Index funds are a good investment choice for investors who are mostly risk-averse and want predictable returns from their investment portfolio. The biggest advantage of index funds is that they do not require extensive tracking. Before investment, investors must study the historical returns of the fund, check the tracking error and make an informed investment decision.
FAQs
Which Nifty Index Fund is best?
Some of the top-performing Nifty index funds are:
HDFC Index Nifty 50
Aditya Birla Sun Life Nifty 50 Index Fund
Motilal Oswal Nifty 50 Fund
Is the Nifty index fund a good investment?
Nifty index funds are best-suited to risk-averse investors who wish to generate better returns from their investment portfolio and want to remain invested for a longer duration. As the Nifty index is made up of 50 stocks, the risk is better diversified here.
How to choose the best index fund?
Investors must first evaluate the index which they want their fund to follow. Accordingly, they must look through the available index fund options in the chosen index. It is also important to check the historical returns, and other factors like expense ratio and tracking errors before making an investment decision.
Do index funds charge fees?
Index funds generally have an expense ratio of 0.5% or less. This is far lower when compared to other mutual funds and therefore, index funds charge lesser fees when compared to other funds.
Can I sell index funds any time I want?
You can sell an index fund investment any time you like. Index funds are like mutual funds, you can always buy it from and sell it to the Mutual fund company. Unlike an ETF you don’t have to look for buyers in the market.
