Best Index Funds to Invest in 2019

Kshitij Samant
Kshitij Samant
kshitijsamant22@gmail.com
best index funds

Before we look at the best index funds in India, let us understand the concept of index funds. Index funds are funds that derive its value from the underlying indices or benchmarks. They are directly proportional to the performance of underlying benchmarks and thus are passively managed. Since the underlying benchmarks or indices are the most essential characteristics in selecting the index funds, it is necessary to understand the performance of these benchmarks and then decide on whether to invest or not. For example, if the benchmark is BSE Sensex, and Nifty is outperforming BSE Sensex, then it would be prudent to invest in index funds with Nifty indices rather than BSE Sensex.

Here is the list of top 5 Index Funds in India

Best Index Funds to Invest in 2019

1. UTI Nifty Fund – Direct

An Equity oriented fund launched on January 1, 2013, this fund is moderate in risk terms, which is providing as follows –

DurationReturns
1 Year3.42%
3 Year11.58%
5 Year12.86%

Key Information – 

Fund SizeRs. 716 Cr.
Age of Fund5 Years
Expense Ratio0.13%
TypeOpen Ended
RiskModerate
Minimum SIP500
PerformanceConsistently exceeded the benchmark of Nifty

2. ICICI Prudential Nifty Next 50 Index Fund

Once again equity oriented fund, however more risky than UTI Nifty Fund, this fund has given higher returns on a consistent note. Came into account in January 2013, this high-risk fund is providing returns as follows –

DurationReturns
1 Year-8.11%
3 Year12.60%
5 Year18.12%

Key Information – 

Fund SizeRs. 157 Cr.
Age of Fund5 Years
Expense Ratio0.45%
TypeOpen Ended
RiskHigh
Minimum SIP1000
PerformanceConsistently outperformed the benchmark of Nifty since its birth.

3. HDFC Index Fund – Sensex Plan – Direct

High-risk investment with an extremely volatile index of BSE Sensex, this fund is an equity oriented fund with moderate performance compared to the above two. Since its launch in December 2012 following is the way the fund has performed –

DurationReturns
1 Year5.86%
3 Year12.07%
5 Year12.80%

Key Information

Fund SizeRs. 117 Cr.
Age of Fund5 Years
Expense Ratio0.85%
TypeOpen Ended
RiskVery High
Minimum SIP500
PerformanceConsistently outperformed the benchmark of S&P BSE Sensex & TRI since its launch.

4. HDFC Index Fund – Nifty Plan – Direct

Launched at the same time as the Sensex Plus Plan, both these funds are identical, except for the main thing that is, the basis of indices is Nifty 50 for this fund. This fund is rated as moderately high as compared to the Sensex plan, and has performed in the following manner –

DurationReturns
1 Year3.56%
3 Year11.55%
5 Year12.98%

Key Information – 

Fund SizeRs. 312 Cr.
Age of Fund5 Years
Expense Ratio0.16%
TypeOpen Ended
RiskModerately High
Minimum SIP500
PerformancePerformance matched with Nifty 50 and exceeded at times.

5. SBI Nifty Index Fund

The scheme has adopted a passive investment strategy. The scheme invests in stocks comprising the Nifty 50 Index in the same proportion as in the index with the objective of achieving returns equivalent to the Total Returns Index of Nifty 50 Index by minimizing the performance difference between the benchmark index and the scheme. The scheme has a risk-grade of moderately high. The performance of the scheme is as follows –

DurationReturns
1 Year3.31%
3 Year11.46 %
5 Year12.48%

Key Information –

Fund SizeRs. 317 Cr.
Age of Fund5 Years
Expense Ratio0.29%
TypeOpen Ended
RiskModerately High
Minimum SIP500
PerformanceConsistently outperformed the benchmark of Nifty since its birth.

Out of the above, the largest fund with respect to size is the UTI Nifty Fund – Direct with a whopping Rs. 716 Cr. of the corpus. However, it’s the ICICI Prudential Nifty Next 50 Plan that has yielded the highest 5-year return of 18.12%.

The judgment cannot be based solely on the above percentage, due to the volatile nature of the indices. However, these returns are calculated based on average returns provided by these over the period one, three & five year period respectively. Additionally, the expense ratio of index funds is very low as they are passively managed funds. All the above-mentioned funds have been launched nearly at the same time. However, according to the performance of their indices they have performed or rather exceeded in their performance when compared to the performance of their benchmarks.

Why Invest in Index Funds?

The best part of index funds is that the fund price is determined by the performance of the underlying indices, which is not just one script or share, but a variety of scripts coming from different sectors and corporates. Therefore, if one sector is suffering stagnation or recession, it is countered by the profit or growth of other sectors. Therefore, index funds provide diversification from the beginning of investment.

One of the unseen advantages of index funds is its passive management. In order to invest in the market, one has to constantly be on the lookout for opportunity and capitalize it, however since index funds provide diversification from the core, it does not require constant supervision, the underlying benchmark does its job. This has a two-fold advantage one is less supervision and other from the investor angle is the low management expenses, which indirectly raises the profit or income of the investor due to low costs.

One of the benefits of index funds is less managerial pressure on the manager of the funds. Index funds being one of the passively managed funds, all the work is done by the underlying indices or benchmarks.

How to Invest in Index Funds?

There are two ways to invest in index funds which is

a. Exchange Traded Funds

Bought through a stockbroker, through a Demat account. These funds cannot be purchased through SIP. Instead, they have to be bought in lots, based on the current NAV, which is derived as per the underlying stocks. This is helpful because if the market is bearish, the funds can be bought at a lower rate. Thus, one can plan its buying and selling accordingly and not according to a fixed SIP date.

b. Open-ended Funds

These are regular mutual funds, which can be availed without a Demat account and also through SIP method. Theses system offer better liquidity and stability.

The above are the ways to invest in index funds, other than that there is one prerequisite to investing in index funds, which is KYC compliance. An Investor needs to complete their KYC before investing, which can be done at any KYC center or bank that offer such services.

Kshitij Samant
Kshitij Samant
kshitijsamant22@gmail.com

A writer by day a reader by night, Kshitij Samant is a Company Secretary currently working with one of the leading real estate brand Panchshil group Pune.

16 Comments
  • Avatar
    Rajan
    Posted at 06:03h, 18 March Reply

    Hello Sir,
    I read all ,I like your artical I want to invest some lumsum money in index fund so pl. Suggest best index fund .

    • gaurav
      gaurav
      Posted at 08:24h, 23 March Reply

      Hello Mr. Rajan, There are multiple things which we have to check before suggesting you any funds, so request you to please reach us at connect@orowealth.com or call us at +917587305393. We will be more than happy to help you.

  • Avatar
    Sam Wilson
    Posted at 17:49h, 08 May Reply

    Index funds in the equity market tend to be run in a way that minimizes turnover. Low-turnover, or high passivity depending upon how you prefer to phrase it, has long been a key to successful investing. Thanks for sharing a great article.

  • Avatar
    Prashant Dhawan
    Posted at 07:02h, 10 May Reply

    How can one index fund be riskier than others? Aren’t they all just matching the index

    • Gaurav Chakraborty
      Gaurav Chakraborty
      Posted at 07:47h, 14 May Reply

      Hello Prashant, The expense ratio of the fund will play a role in the returns. If the Index fund is having a high expense ratio, then it will have less return whereas the funds having less expense ratio will give more returns.

  • Avatar
    Sujatha badisa
    Posted at 15:47h, 13 May Reply

    I am waiting to invest in index funds nifty 50,jr nifty next 50 in SIP. for long period. Plz suggest me.

    • Gaurav Chakraborty
      Gaurav Chakraborty
      Posted at 07:44h, 14 May Reply

      Hello Mam, You can invest in ICICI Prudential Nifty Next 50. Request you to please reach us at +919167451886 or drop a mail at connect@orowealth.com so we can discuss regarding the kind of portfolio you want and suggest you the best funds.

  • Avatar
    Priyashree
    Posted at 20:17h, 20 May Reply

    I’m a new investors want to invest some money in mutual fund.Is index fund will be a better option instead of making investment straightly in mutual.
    Plz guide me

    • Gaurav Chakraborty
      Gaurav Chakraborty
      Posted at 12:45h, 21 May Reply

      Yes Priyashree, You can invest in an Index fund directly. You can reach us at +91-9167451886 for more investment advisory.

  • Avatar
    D D KORANNE
    Posted at 09:00h, 28 May Reply

    I have invested in Reliance Jr bees ETF , Kotak nifty ETF and kotak nv 20…… which one should I add more ? Should I did continue any of these ? Or maintain all ?
    Rgds
    D D KORANNE

  • Avatar
    GOPAL SUKAM
    Posted at 09:56h, 03 August Reply

    I want to invest in top-performing nifty 50 index fund through SIP for at least 12 years.let me know the name of such fond

  • Avatar
    GOPAL SUKAM
    Posted at 09:57h, 03 August Reply

    I want to invest in top-performing nifty 50 index fund through SIP for at least 12 years. let I know the name of such FUND

  • Avatar
    Guraviah Sreenivasulu
    Posted at 14:50h, 12 August Reply

    Newly invest through Sip which is best investment fund suggests me for long term

  • Avatar
    Arjun
    Posted at 20:32h, 04 October Reply

    I want to invest top 50 nifty index fund

  • Avatar
    Avinash Bhat
    Posted at 03:15h, 18 October Reply

    I have invested Rs.1 lacs lumpsom on 23*08-2018 in SBI NIFTY index fund.
    Still it is not showing any growth.
    Please advise should I sell and bear the loss

    • Gaurav Chakraborty
      Gaurav Chakraborty
      Posted at 10:58h, 24 October Reply

      Hello Avinash, Request you to please get in touch with our personal advisor on +91-9167451886, so they can advise you on this.

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