Index Funds are those funds which invest in an underlying index. Such funds exactly mimic Index in terms of the portfolio returns. Index fund has the same stocks in the same ratios as the stocks listed in the selected Index. We will discuss about index fund and tell you what are the best index fund in India 2021

2021 is a year of turnaround as the whole world is recovering from the Pandemic blues. Everyone is very optimistic about Indian equities. So we are discussing the best index funds in India in 2021.
Features of Index Funds
- Index funds are good long-term investment
- The success of these funds predominantly depends on the choice of index and their volatility
- These funds create a portfolio that almost replicates the chosen index
- Given the dependence of these funds on the performance of an index, index funds are passively managed; hence, these funds are not meant to outperform the market but instead mimic the index in terms of performance
- Due to the passive management of these funds, they involve a lesser expense ratio.
- Index funds provide broad market exposure and low portfolio turnover to the investors
5 Quick facts about index funds
- Index funds are more popular in developed countries. Index funds are passive investment funds. Generally these funds are free of investment bias as Index funds replicate stocks of the underlying Index.
- Index funds come with lower fees than mutual funds managed daily by professional brokers — and they often show better returns in comparison to relative Index.
- They pool money from various investors to buy the individual stocks, bonds or securities that make up a particular market index.
- Index funds are a good way to minimize risk because they track a market index, which generally rises in value over time.
- Their potential gains and losses are less volatile in comparison to those of managed funds that try to beat the market.
What is an index fund?
Index funds are mutual funds that invest in an Index. Main objective of Index Fund is to replicate a particular stock market index in terms of the portfolio.
As Index funds are categorized as passive funds there is very less involvement of fund managers and they don’t try to beat the market, or earn higher returns compared with market averages. Instead, these funds try to beat the market — buying stocks of every firm listed on an index to mirror the performance of the index as a whole.
Investing in Index funds is the real truth of developing markets as most of the active fund managers are lagging the benchmark Index returns. Further these funds can help balance the risk of an investor’s portfolio, as market swings tend to be less volatile across an index compared with individual stocks.
Things to look at Before Investing in Index Funds Passive
- Management: Index funds are passive mutual funds. Passive mutual funds are those funds which do not have any active involvement of the fund manager. Like mentioned above, fund managers of index funds imitate the performance of an index. He/she cannot have a say in which stocks go in and out of the fund, how much of the fund’s money will be invested in which stock.
- Index: Check the benchmark index and risk associated with It, whether it suits your investment needs.
- Cost: However Expense ratio for Index funds is very low, But still these charges and other costs to the fund by the AMC becomes crucial in this case so one should also have a close look at those factors.
- Historical Data: One should check historical performance of the fund. One should check the index fund has been successful in aligning its portfolio to the benchmark index and if there were any repeated and reported discrepancies.
Who should invest ?
- Index funds are suitable for investors who like to stay put with their investments for the long term
- One should invest in index funds if He/She is willing to stay away from constant monitoring and juggling of your mutual fund portfolio
- You may invest in these funds if you are looking to gain from the mirror returns of SENSEX, NIFTY, MIDCAP,SMALLCAP INDEX, etc.
- These funds will be suitable for you if you wish to get better returns than Fixed Deposits over long term
- You should invest in index funds only if you are looking for a buy-&-hold over long term of 5 years or more
- If you are risk-averse investor, you may consider investing in index funds since these are less prone to equity-related volatility and risks
Here we are discussing top 10 index funds in India in 2021
These are the best Index funds to invest in 2021
1. Nippon India ETF Nifty BeES
Inception date of this fund is 03 Oct 2000. Main objective of this fund is to invest in stocks of Nifty 50. Current AUM of the scheme is 2803 Cr. The fund manager for this fund is Vishal Jain . This fund’s objective of investment is generating returns from investing in top companies of the Sensex Index.
Current AUM of the scheme is 2803 Cr.
Three year return for the scheme is 14.5 %.
Holding Security | Holding % |
HDFC Bank | 10.3 % |
Reliance Industries | 10.1 % |
Infosys | 7.8 % |
HDFC | 7.3 % |
ICICI Bank | 6.3 % |
2. Nippon India Nifty 50 Value 20 index fund
Inception date of this fund is 04 Feb 2020. Main objective of this fund is to invest in 20 most valued stocks of the Nifty 50 index. The fund manager for this fund is Mehul Dama. This fund is quite a value investing fund.
Current AUM of the scheme is Cr [this fund is NFO].
Three year return for the scheme is % [Not yet opened for repurchase].
Holding Security | Holding % |
HDFC Bank | 10 % |
Reliance Industries | 9 % |
TCS | 8 % |
HDFC | 7 % |
ICICI Bank | 6 % |
3. ICICI Prudential Nifty Index Fund
Inception date of ICICI Pru Nifty index is 08 Sep 2015. Current AUM of scheme is 1262 Cr. This fund is an investing stock constituent of CNX Nifty. The Fund manager for the scheme is Kayzad Eghlim.
Current AUM of the scheme is 1262 Cr.
Three year return for the scheme is 14.1 %.
Holding Security | Holding % |
HDFC Bank | 10.2 % |
Reliance Industries | 10.1 % |
Infosys | 7.8 % |
HDFC | 7.2 % |
ICICI Bank | 6.3 % |
4. SBI Nifty Index Fund
SBI Mutual Fund manages SBI Nifty Index Fund and this fund follows the performance of the Nifty 50 index. The fund manager for the scheme is Raviprakash Sharma. Mr Shamra manages other index ETFs, gold ETFs, gold funds among other funds he manages for the AMC. This scheme’s launch was in Mar 2004.
Current AUM of the scheme is 2803 Cr.
Three year return for the scheme is 14 %.
Holding Security | Holding % |
HDFC Bank | 10 % |
Reliance Industries | 9.9 % |
Infosys | 7.6 % |
HDFC | 7.1 % |
ICICI Bank | 6.2 % |
5. ICICI Prudential Nifty Next 50 Index Fund
ICICI Prudential Mutual Fund manages this fund. This fund replicates the performance of the Nifty Next 50 Index. This index consists of 50 companies from the Nifty 100 Index after excluding the Nifty 50 companies. The fund manager for this fund is Kayzad Eghlim. Inception date of the fund is 25 June 2010.
Current AUM of the scheme is 151 Cr.
Two year return for the scheme is 17.7 %.
Holding Security | Holding % |
Avenue Supermarts (Dmart) | 4.4 % |
Adani Green Energy ltd | 4.4 % |
Tata Consumer Products | 3.8 % |
Info Edge (India) Ltd | 3.7 % |
Dabur India Ltd | 3.3 % |
6. UTI Nifty Next 50 Index Fund
UTI Mutual Fund manages UTI Nifty Next 50 Index Fund. This fund exactly imitates the Nifty 50 index. Inception date of the fund is 28 June 2018. Current AUM of the fund is 780 Cr. The fund manager of the fund is Sharwan Kumar Goyal.
Current AUM of the scheme is 3097 Cr.
Three year return for the scheme is 14.3 %.
Holding Security | Holding % |
HDFC Bank | 10.3 % |
Reliance Industries | 10.2 % |
Infosys | 7.8 % |
HDFC | 7.3 % |
ICICI Bank | 6.3 % |
7. Motilal Oswal S&P 500 Index Fund
Motilal Oswal AMC manages the Motilal Oswal S&P 500 Index Fund . This imitates the U.S-based index S&P 500. The S & P 500 Index has the top 500 companies of the U.S. Companies like Apple, Facebook, Xerox, Google, Netflix, Microsoft, Disney and many more are listed on the index. Inception date of the fund is on 28 Apr 2020. Hiren Visaria and Abhiroop Mukherjee are the fund managers of the scheme.
Current AUM of the scheme is 832 Cr.
Six month return for the scheme is 25.4 %.
Holding Security | Holding % |
Apple | 6.2 % |
Microsoft | 5.2 % |
Amazon | 4 % |
1.8 % | |
Tesla | 1.8 % |
8. Axis Nifty 100 Index Fund
Axis Nifty 100 Index Fund is being run by Axis Mutual Fund. It imitates the Nifty 100 index. Inception date of the fund is 18 October 2019. Current AUM of the scheme is 345 cr. The Nifty 100 index lists the top 100 companies by full market cap from the Nifty 500 index. Ashish Naik is managing this fund.
Three year return for the scheme is 13.15 %.
Holding Security | Holding % |
HDFC Bank | 8.9 % |
Reliance Industries | 8.8 % |
Infosys | 6.7 % |
HDFC | 6.3 % |
ICICI Bank | 5.4 % |
9. Franklin India Index Fund-NSE Nifty Plan
The Nifty Plan of Franklin India Index Fund. Launch date for the fund was on 04 August 2020. Current AUM of the scheme is 367 cr and scheme invest in Nifty Index. The fund managers for this scheme are Varun Sharma & Pyari Menon. The fund belongs to the Franklin Templeton Mutual Fund.
Three year return for the scheme is 13.2 %.
Holding Security | Holding % |
HDFC Bank | 10.3 % |
Reliance Industries | 10.1 % |
Infosys | 7.7 % |
HDFC | 7.2 % |
ICICI Bank | 6.3 % |
10. Nippon India Nifty Smallcap 250 index Fund
The investment objective of this fund is to provide returns closely corresponding to the total returns of the securities as represented by the Nifty Smallcap 250 Index before all the expenses, subject to tracking error. Current AUM of this fund is 160 Cr and This fund is focusing investment in stocks of Nifty Smallcap Index. Inception date of the fund is 16 Oct 2020. The fund manager for this scheme is Mehul Dama who has 14 years of rich experience in Equity market.
Three month return for the scheme is 29.4 %.
Holding Security | Holding % |
Laurus Labs Ltd | 2.4 % |
Indiamart Intermesh Ltd | 2.0 % |
Dixon Technologies | 1.9 % |
Tata Elxsi Ltd | 1.8 % |
MCX | 1.6 % |
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Taxation on Index Funds
Tax on short term capital gains from the investments in Index funds is 15% if An investor sells the units within the time period of 1 year from the date of allotment. However, the Tax rate on long term capital gains made on the sale of units priced at over Rs. 1 lakh, within a year from the date of allotment is 10% without indexation.
For example-
If an investor has made a capital gain of ₹1,00,000 on investment in an equity fund, Short Term Capital Gains Tax of 15% would be levied if s/he withdraws the amount within one year of investment. The payable tax would be ₹15,000.
Also, if an investor has made a capital gain of ₹1.8 lakh on investment in an equity fund, and withdraws the amount after 1 year of investment, Long Term Capital Gains Tax of 10% would be levied on ₹80,000. ₹1Lakh is exempted from taxation. The payable tax would be ₹80,00.
How to Invest in Index Funds
You can invest in best index funds in India 2021 through either of the following ways-
Offline mode of investing
If you are not confident of your knowledge, you may choose to invest through a broker. However, investing in a fund through a broker will make you eligible for investments through regular plans that offer different returns and varied expenses in investment. If you wish to invest in the fund independently, you must visit the nearest branch of the AMC of the particular fund. Don’t forget to carry the following documents-
Identity Proof (Aadhar Card)
Canceled cheque
Passport size photos (around 4-5)
PAN Card
KYC documents (for KYC verification) You can do online KYC through our Online mutual fund Application of fundexpert Xpertvoice
Online mode of investing
If you do not wish to add on to your expense of commissions or brokerage, you may visit online investment platforms such as xpertvoice.in wherein you can choose from and compare more than 1,000 funds- all in one place, instead of following the long procedure of visiting the website of each AMC and then choosing from them. Here, you can select the fund in which you want to invest, look at the details and compare similar schemes as well as use SIP Calculator or Lumpsum Calculator to estimate the future value of your investment
Suppose wana buy UTI index fund then which bank to proceed… Pls explain step wise…
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