Best Index Funds in India 2025

If you want to start investing wisely in 2025, index funds can be an excellent option for you, especially if you are searching for the best index funds in India that offer stable and low-cost diversification. The demand for the top index funds in India is constantly growing today because these funds offer exposure to the entire market at a low cost and have the potential to deliver stable returns in the long term. Recently, SEBI has further tightened transparency related to tracking error and tracking difference, making it easier for investors to choose the right fund. In this blog, we will explore which top index funds in India are best in 2025 and how to choose them wisely.

What Are Index Funds and How Do They Work?

An index fund is a type of mutual fund that replicates the performance of a market index, such as the Nifty 50 or Sensex. This means the fund invests in the same companies included in that index and in the same proportions. Its goal is not to outperform the market, but to track its performance.

How Index Funds Work?

Investing in this fund means your money is invested in all the companies included in that index. The fund manager doesn’t select individual stocks; they simply update the portfolio when the index changes. This is why these funds have lower costs and their returns closely track the index.

10 Best Index Funds in India 2025

Below is a curated list of the best index funds in India that have shown strong consistency and long-term potential :

S.No	Fund Name	Current NAV	AMU(Cr.)	3Y Return Annualised (%)	Expense Ratio (%)
1	Motilal Oswal Nifty Midcap 150 Index Fund	₹38.10	₹2631	22.50%	0.26%
2	Nippon India Nifty Smallcap 250 Index Fund	₹33.13	₹2563	21.68%	0.35%
3	Nippon India Nifty Midcap 150 Index Fund	₹25.78	₹2030	23.47%	0.30%
4	DSP NIFTY Next 50 Index Fund	₹26.98	₹1135	17.96%	0.28%
5	Motilal Oswal Nifty Smallcap 250 Index Fund	₹38.17	₹1042	22.08%	0.33%
6	Kotak Nifty Next 50 Index Fund	₹20.37	₹809	17.74%	0.10%
7	Nippon India Nifty Next 50 Junior BeES FoF	₹26.26	₹631	17.78%	0.12%
8	ICICI Prudential Nifty Smallcap 250 Index Fund	₹17.34	₹571	21.92%	0.30%
9	Aditya Birla Sun Life Nifty Midcap 150 Index Fund	₹25.20	₹405	22.55%	0.44%
10	Aditya Birla Sun Life Nifty Smallcap 50 Index Fund	₹21.03	₹248	26.03%	0.46%

Read Also: Top 10 High-Return Mutual Funds in India

1. Motilal Oswal Nifty Midcap 150 Index Fund

The Motilal Oswal Nifty Midcap 150 Index Fund is a good option for those looking to invest in mid-cap companies. This fund tracks the Nifty Midcap 150 Index, which comprises 150 strong and emerging companies in India. The fund’s portfolio is quite diversified and includes well-known companies such as BSE Ltd., Hero MotoCorp, Dixon Technologies, Suzlon Energy, PB Fintech, HDFC AMC, Coforge, Cummins India, Persistent Systems, and Fortis Healthcare. Motilal Oswal AMC was established on November 14, 2008, and today manages total assets of approximately ₹92.51 lakh crore. This fund is suitable for investors seeking stable and balanced returns over the long term without taking on excessive risk.

Fund Performance

Parameters	Value
Alpha	0.07%
Beta	1.00
Sharpe Ratio	1.03
P/E	32.22

2. Nippon India Nifty Smallcap 250 Index Fund

The Nippon India Nifty Smallcap 250 Index Fund is a good option for investors looking to invest in small-cap companies. This fund tracks the Nifty Smallcap 250 Index, which comprises 250 emerging Indian companies that have the potential for rapid growth in the future. Its portfolio includes companies like Multi Commodity Exchange, Laurus Labs, CDSL, Delhivery, Radico Khaitan, and Kaynes Technology, all of which hold strong positions in their respective sectors. This fund is managed by Himanshu Mange and is operated by Nippon India Mutual Fund. This AMC has been operating since February 24, 1995, and manages assets worth approximately ₹573.67 lakh crore. This fund is suitable for investors who are seeking growth in small-cap stocks and are willing to take on a moderate level of risk.

Fund Performance

Parameters	Value
Alpha	-0.13%
Beta	1.02
Sharpe Ratio	0.83
P/E	34.23

3. Nippon India Nifty Midcap 150 Index Fund

The Nippon India Nifty Midcap 150 Index Fund is designed for investors who want to participate in the growth of the mid-cap segment. This fund tracks the Nifty Midcap 150 Index and invests in 150 emerging Indian companies that have the potential to become large-cap companies in the future. Its portfolio includes companies such as BSE Ltd., Hero MotoCorp, Dixon Technologies, Suzlon Energy, PB Fintech, HDFC AMC, Coforge, Cummins India, Persistent Systems, and Fortis Healthcare. The fund is managed by Himanshu Mange and is offered by Nippon India Mutual Fund. This AMC has been active since February 24, 1995, and currently manages assets worth approximately ₹573.67 lakh crore. The fund is known for its low costs and stable returns.

Fund Performance

Parameters	Value
Alpha	-0.14%
Beta	0.99
Sharpe Ratio	1.01
P/E	32.17

4. DSP Nifty Next 50 Index Fund

The DSP Nifty Next 50 Index Fund is an excellent fund for those who want to invest in the next line of companies after the large-cap companies. This fund tracks the Nifty Next 50 Index, which includes several strong and growing companies. Its portfolio includes companies like Hindustan Aeronautics, TVS Motor, Vedanta, Divi’s Labs, Britannia, Tata Power, Avenue Supermarts, and Indian Hotels, all of which are performing well in their respective sectors.

This fund is managed by Anil Ghelani and is operated by DSP Mutual Fund. The company has been operating since May 13, 1996, and manages assets worth approximately ₹192.79 lakh crore. This fund is a good option for those who are willing to take a moderate risk for stable returns.

Fund Performance

Parameters	Value
Alpha	0.88%
Beta	1.32
Sharpe Ratio	0.69
P/E	21.60

5. Motilal Oswal Nifty Smallcap 250 Index Fund

The Motilal Oswal Nifty Smallcap 250 Index Fund is a straightforward and intelligent way to invest in small-cap companies. This fund tracks the Nifty Smallcap 250 Index, which includes companies with strong growth potential. Its portfolio includes companies like Multi Commodity Exchange, Laurus Labs, CDSL, Delhivery, and Radico Khaitan, which have consistently performed well in their respective sectors. The fund is managed by Swapnil P. Mayekar and is operated by Motilal Oswal AMC, which has been in operation since November 14, 2008. The company manages assets worth approximately ₹92.51 lakh crore. This fund is an excellent option for investors who want to benefit from the long-term growth potential of small-cap stocks.

Fund Performance

Parameters	Value
Alpha	0.21%
Beta	1.03
Sharpe Ratio	0.84
P/E	34.23

6. Kotak Nifty Next 50 Index Fund

The Kotak Nifty Next 50 Index Fund is an excellent option for those who want to invest in companies that are next in line after the large-cap companies. This fund tracks the Nifty Next 50 Index, which comprises companies that have the potential to become part of the Nifty 50 in the future. The fund includes companies like Hindustan Aeronautics, TVS Motor, Vedanta, Divi’s Laboratories, Britannia, Tata Power, BPCL, and Indian Hotels, all of which have been consistently performing well. This fund is managed by Devender Singhal and is operated by Kotak Mutual Fund. The company has been operating since August 5, 1994, and manages assets worth approximately ₹492.72 lakh crore. This fund is a good option for investors who are looking for stable returns and are willing to take on a moderate level of risk.

Fund Performance

Parameters	Value
Alpha	0.88%
Beta	1.32
Sharpe Ratio	0.69
P/E	21.60

7. Nippon India Nifty Next 50 Junior BeES FoF

Nippon India Nifty Next 50 Junior BeES FoF is an easy way for investors to gain exposure to the Nifty Next 50 Index without directly trading in the ETF. It is a Fund of Funds that invests almost entirely in the Nippon India ETF Nifty Next 50 Junior BeES. This provides investors with exposure to the next tier of growth companies within the large-cap segment. The majority of its assets are held in the ETF, with a small portion in TREPS (Tri-Party Repo) to maintain liquidity. The fund is managed by Himanshu Mange and operated by Nippon India Mutual Fund. This fund house has been operating since February 24, 1995, and manages assets worth ₹573.67 lakh crore. Its low expense ratio and simple structure make it an easy way to invest in the Next 50 index.

Fund Performance

Parameters	Value
Alpha	1.18%
Beta	1.30
Sharpe Ratio	0.70
P/E	21.79

8. ICICI Prudential Nifty Smallcap 250 Index Fund

The ICICI Prudential Nifty Smallcap 250 Index Fund is designed for investors looking for long-term investment opportunities in small-cap stocks. This fund tracks the Nifty Smallcap 250 Index and invests in companies that are leaders in their respective sectors. Its portfolio includes companies such as Multi Commodity Exchange, Laurus Labs, CDSL, Delhivery, Radico Khaitan, and Kaynes Technology, which are steadily building a strong market position. The fund is managed by Nishit Patel and operated by ICICI Prudential AMC, which has been in operation since June 22, 1993. The company manages assets worth approximately ₹908.28 lakh crore. This fund is considered a stable and low-cost option in the small-cap segment.

Fund Performance

Parameters	Value
Alpha	-0.01%
Beta	1.02
Sharpe Ratio	0.83
P/E	34.23

9. Aditya Birla Sun Life Nifty Midcap 150 Index Fund

The Aditya Birla Sun Life Nifty Midcap 150 Index Fund is a good investment option in mid-cap companies, suitable for investors seeking long-term growth. This fund tracks the Nifty Midcap 150 Index and invests in 150 strong and emerging companies in India. Its portfolio includes companies such as BSE Ltd., Hero MotoCorp, Dixon Technologies, Suzlon Energy, PB Fintech, HDFC AMC, Coforge, Cummins India, Persistent Systems, and Fortis Healthcare. The fund is managed by Priya Sridhar, while it is administered by Aditya Birla Sun Life AMC, which has been active since September 5, 1994, and manages assets worth ₹385 lakh crore

Fund Performance

Parameters	Value
Alpha	-0.04%
Beta	1.00
Sharpe Ratio	1.02
P/E	32.22

10. Aditya Birla Sun Life Nifty Smallcap 50 Index Fund

The Aditya Birla Sun Life Nifty Smallcap 50 Index Fund is a good option for investors who want to invest in small but fast-growing companies. This fund tracks the Nifty Smallcap 50 Index and invests in 50 emerging Indian companies that have the potential for strong future growth. Its portfolio includes companies such as Multi Commodity Exchange, Laurus Labs, CDSL, Delhivery, Radico Khaitan, Kaynes Technology, Karur Vysya Bank, Crompton Greaves, Cholamandalam Financial Holdings, and CAMS. All of these companies are growing rapidly in their respective sectors and exhibit strong fundamentals. This fund is managed by Priya Sridhar and is operated by Aditya Birla Sun Life AMC, which was established on September 5, 1994. The company has assets under management of approximately ₹385 lakh crore. This fund is considered suitable for investors who are comfortable with the risks associated with growth investing in the small-cap segment.

Fund Performance

Parameters	Value
Alpha	3.17%
Beta	1.04
Sharpe Ratio	0.97
P/E	33.85

Read Also: Best Defence Sector Mutual Funds in India

How to Select the Best Index Fund in India

Choosing the best index fund becomes easier when you focus on a few proven factors : 

1. Choosing the Index : First, decide which index you want to invest in Nifty 50, Nifty Next 50, or Nifty 500. If you are investing for the first time, the Nifty 50 is considered the best starting point as it covers large and stable companies.
2. Expense Ratio : The advantage of an index fund lies in its low cost. Always choose a fund with an expense ratio of 0.20% or less, so that it doesn’t significantly impact your returns in the long run.
3. Tracking Difference : Check how closely the fund’s return matches its index. If the difference is too large, the fund is not accurately tracking the index. Try to choose a fund that has consistently maintained a low tracking difference.
4. Fund Size (AUM) : Funds with a large AUM (Assets Under Management) are generally more reliable because they tend to have lower costs and better tracking. It’s wise to avoid very small funds.
5. Replication Method : Check whether the fund uses full replication or sampling. Funds that use full replication accurately track the entire index and usually deliver more precise results.

Common Mistakes to Avoid While Investing in Index Funds

1. Relying solely on past returns : Many investors select funds based solely on their past performance. However, with index funds, it’s crucial to consider the tracking difference and expenses (TER), as future returns depend on these factors.
2. Holding multiple funds tracking the same index : Sometimes, people buy different funds that track the same index. Doing so doesn’t provide any additional benefit; instead, it complicates the portfolio.
3. Ignoring tracking difference and AUM : If a fund has a small AUM or a high tracking difference, it can impact returns. Always check these two factors.
4. Frequently switching funds : The benefits of index funds are realized only when you maintain your investment for the long term. Frequently switching funds increases costs and reduces returns.

Read Also: Best Money Market Mutual Funds in India

Conclusion 

If you want to invest in the stock market without taking on too much risk, the best index funds in India offer a simple and dependable way to get started.. They allow you to invest in the entire market at once, and at a low cost. Just choose the right fund, be patient, and give your investment time to grow. In the long run, this small step can become a source of strong and reliable returns for you.
In the long run, selecting the best index funds and staying invested can build strong and reliable wealth.

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