Top Index Funds to Invest in India 2025

The equity market continues to attract investors with its consistent returns. However, for some investors, stocks and active mutual funds can be too volatile to handle! Index funds have emerged as a compelling choice for these investors, particularly for those seeking low-cost and diversified exposure to the equity market.

Index funds replicate the performance of specific market indices, like Nifty 50, Sensex, Nifty Next 50, etc. Both seasoned and new investors benefit from this transparent exposure to the equity markets through index funds. In 2025, the appeal of index funds is stronger than ever due to heightened market volatility and evolving global economic trends. In this article, we have created a list of top index funds for 2025.

What are Index Funds

Index mutual funds are designed to mirror the performance of a specific index in the stock market, such as the Nifty 50 or the BSE Sensex. These funds invest your funds in the same set of companies and in the same proportion as the index itself.

As a low-cost investment avenue, index funds offer transparency and help you spread your assets across top-performing sectors. 

Key features of index funds include:

• Very low expense ratio
• Broad diversification across sectors
• Returns depend on market performance
• No bias of fund managers or the risk of stock-picking
• Easy liquidity and flexible investment modes through

Index funds saw record inflows in FY25, and several factors contributed to this surge. Folios of individual investment accounts for index funds and ETFs recorded a 48.3% Y-o-Y surge. In this category, the total number of folios rose to 4.15 crore. 

With the equity markets in India likely to remain dynamic, you can consider exploring the top index funds 2025 and grow your wealth.

List of the Top Index Funds to Watch in 2025

Key Factors to Consider Before Investing in Index Mutual Funds

As an investor, it’s easy to find yourself in a dilemma while choosing an index fund in 2025. We have discussed five crucial factors to evaluate before you choose one of the funds.

1. Benchmark Index

In the first place, investors must understand which index the fund tracks. It can be Nifty 50, Nifty Next 50, Nifty Midcap 150, Smallcap 250, or any other index. The reward profiles of each of these indices differ. For stability, you can consider large-cap indices, while mid and small-cap indices balance risk and growth.

2. Tracking Error

Tracking error is a crucial parameter for index funds that reflects how closely the fund mirrors its underlying index. Therefore, a lower tracking error means that the fund is doing a better job replicating the performance of the index. Make sure to track the historical tracking error of the fund to ensure it consistently delivers returns close to the respective benchmark.

3. Expense Ratio

Costs like expense ratios matter even in passive investing. Choose an index fund with a lower expense ratio, which means lesser gains will be eroded by fees, and you’ll get more returns in the long run. In 2025, some of the top index funds offer expense ratios below 0.25%.

4. Assets Under Management (AUM)

A fund with a higher AUM typically indicates the confidence of investors. These funds also enjoy better liquidity and scale. While AUM isn’t the only indicator of performance, it’s a valuable signal of the market reputation of the fund.

5. Investment Horizon and Risk Tolerance

Index funds are best suited for investors with a long-term horizon. Typically, if you plan to invest for five years or longer, investing in one of the top index funds in India makes sense. However, you must be prepared for short-term volatility since index funds follow the market without active downside protection. It’s the magic of compounding over the long run that makes them rewarding.

Conclusion

If you’re looking for top mutual index funds, we have got you covered in this guide. Index funds are highly suitable for “Invest and Forget” investments. In this list, we have covered indices tracking large-cap, mid-cap, and small-cap funds. With high AUMs and low expense ratios, all these funds appeal to investors seeking long-term wealth-building strategies. To start investing, you can check out index funds on Share.Market.

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