(Last Updated: October 2, 2019)
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Which are the Best Index Funds in India? Top Performing List



  • You might have read about index funds. I like researching on different type of mutual funds. So, here I thought to compile a list of Best Index funds in India. Some of the Top Performing Index funds, the investor's choice.

    What is an Index?
    Ever determined how Index gains or loose points. It all depends on the composition of Index.

    An index is a composition of stocks with large market capitalisation. Change in the price and weightage of the stocks included in the index moves the points. With the change in market capitalisation of stocks, weightage of stock in the index is determined.

    So, we will hear different investors sharing views on the Best Index Funds in India.

    What are Index Funds? 
    In the same way, Index Funds are designed, in which portfolio of the fund is replicated of the tracking index with the same number and weight age of stocks. In India, Index funds are not so popular among investors due to its awareness and less returns in short term than other equity funds.

    An investment into Index Funds is ideally done for long term investing. These funds are less volatile and a good alternative for risk-averse investors in equity mutual funds.
     
    Index Funds: Things to know before investing

    • Index funds are passively managed funds meaning, the fund manager has no role in the selection of stocks and its performance.
    • These mutual funds have low expense ratio than other equity funds. This is because of the limited role of manager and less transaction cost.
    • Index funds are diversified in nature. As the index represent companies of different sectors, index funds also replicate the same composition.
    • The main factor in index funds is Tracking error. Simply stating, tracking error is the variation in return against the index they track. It happens due to inflow/outflow of funds, corporate actions, change in index constituents. Lower tracking error implies better management of the fund.

    Best Index Funds in India: Top Performing List 2019

    • UTI Nifty Index Fund
    • Reliance Index Fund - Sensex Plan
    • LIC MF Index Fund - Sensex Plan
    • ICICI Pru Nifty Index Fund
    • Franklin India Index Fund -NSE Nifty Plan
    • SBI Nifty Index Fund
    • IDBI Nifty Index Fund
    • Reliance Index Fund - Nifty Plan
    • LIC MF Index Fund - Nifty
    • HDFC Index Fund- Nifty Plan
    • HDFC Index Fund - Sensex plan

    Note: This is just a random list (not in any sequential order) based on my personal observations.
     
    Details of the some of the Index funds are:

    UTI Nifty Index Fund
    UTI Nifty funds invest in securities of companies comprising of the Nifty 50 in the same weight age as they have in Nifty 50. The fund strives to minimise performance difference with Nifty 50 by keeping the tracking error to the minimum. The fund has been launched in March 2000, has well captured the rise of Nifty from 1400 level to now of 9200. The fund has given a annualised return 10.92% since inception.

    Franklin India Index Fund - NSE Nifty Plan
    The fund's objective is to invest in companies whose securities are included in the Nifty and subject to tracking errors, endeavouring to attain results commensurate with Nifty 50 Index under NSE Nifty Plan, and to provide returns that, before expenses, closely correspond to the total return of common stocks as represented by the S&P BSE Sensex under S&P BSE Sensex Plan. The investment in the fund is a moderately high risk.

    SBI Nifty Index Fund
    The fund invests in all the stocks comprising Nifty 50 Index in the same proportion as their weight age in the index. The fund launched in Feb 2002 has given a good return since inception. The fund has been able to keep the fund's tracking error low. It is moderately high-risk fund.

    ICICI Prudential Nifty Index Fund
    The scheme aims to closely track the performance of Nifty 50 Index by investing in almost all the stocks and in approximately the same weight age that they represent in the index. The fund is suitable for long-term wealth creation by replicating the S&P CNX Nifty index.  The fund has been launched in Feb 2002 and has given good return since then.

    IDBI Nifty Index Fund
    The fund's objective is to invest in the stocks comprising the Nifty 50 Index in the same weights as these stocks represented in the index with the intent to replicate the performance of the Total Returns Index of S&P CNX Nifty. The fund is relatively new, launched in June 2015. The fund's tracking error is marginally high and has underperformed the index.

    HDFC Index Fund - Nifty Plan
    The scheme aims to generate returns that are commensurate with the performance of Nifty 50, subject to tracking errors. The fund offers only Growth option for investment in the fund. The annualized return of the fund since inception (July 2002) is quite impressive.

    Reliance Index Fund - Nifty Plan
    The objective of the scheme is to replicate the composition of the NIFTY, with a view to generate returns that are commensurate with the performance of the NIFTY, subject to tracking errors. The fund is consistent with a return since inception.

    HDFC Index Fund - Sensex Plan
    The objective of the scheme is to generate returns that are commensurate with the performance of S&P BSE Sensex, subject to tracking errors. The fund has AUM of Rs. 105 crore and was launched in July 2002, has given a annualized high return since inception.

    This list of funds is arrived after comparing different funds from the same category. Only those funds are selected which have less tracking error and has performed consistently.

    Best Index Funds: Conclusion

    Investing in index funds is ideally best for the long term period of more than 5 years. As historical data shows, the returns of funds since inception which are more than 10 years have successfully given double digit return to investors and is par to returns of many actively managed equity funds.

    The low cost, easy to track fund design are some of the unique features of and index fund. Due to less awareness among the public regarding Index Funds, the asset size remains small in most of the fund.

    Disclaimer:
    This post is for information purpose only. It should not be constituted as a professional advice in any regard. Investors are requested to do their own due diligence before investing into any of the above mentioned funds.

    Do you wish to add any other popular and best performing Index funds? Feel free to add your opinions thereon.



  • The idea behind index fund is to replicate the performance of an index like Nifty 50 or Sensex. These are also called passive funds wherein expense ratio is less as compared to actively managed funds.

    So, I feel index funds suit the investors who wish to invest for a longer duration. The historical data also implies that index funds perform better over longer periods. There may be short term volatility. But, overall it seems to be an investment alternative to build long term wealth. What do you think?



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