Best Low-Cost Index Funds in India: In the year 2008, billionaire Warren Buffet issued a challenge to the hedge fund industry. In his opinion, the industry charged exorbitant fees that the fund’s performance could not justify. Buffett’s contention was that an index fund including fees, costs, and other expenses, would outperform a hand-picked portfolio of hedge funds over 10 years. Ten years later, Buffett won the bet.
In a letter to his shareholders, Buffett estimated that financial “elites” had wasted at least $100 billion over the past decade by refusing to settle for low-cost index funds. In this article, we shall understand what index funds are, and take a look at some of the Best Low-Cost Index Funds in India. Keep reading to find out!
What is an index fund?
An index fund is a type of mutual fund whose portfolio is constructed to match or track the components of a financial market index, such as the BSE Sensex or the NSE Nifty 50. It provides broad market exposure, low operating expenses, and low portfolio turnover.
Index funds follow their benchmark index, regardless of what happens in the market. In other words, they follow a passive investment strategy. They are based on the theory that the market will outperform any single investment in the long term.
Best Low-Cost Index Funds in India
Here is a list of the Best five low-cost index funds in India, based on 3-year annualized returns, their expense ratio, and other parameters:
Best Low-Cost Index Funds in India #1 – Bandhan Nifty 50 Index Fund Direct-Growth
| Fund Company | Bandhan Asset Management Company | 1-year Returns | -0.5% |
|---|---|---|---|
| Date of Inception | December 20, 1999 | 3-year Returns (annualized) | 30.5% |
| Fund Size (AUM in Cr) | 644.34 | Expense Ratio | 0.10% |
| No. of Stocks Held | 50 | Exit Load | 0.00% |
IDFC Mutual Fund has renamed itself as Bandhan Mutual Fund. As a result, its schemes are renamed with the word ‘Bandhan’ replacing ‘IDFC’ in each of them. Bandhan Nifty 50 Index Fund Direct-Growth is a mutual fund scheme from Bandhan Mutual Fund it was made available to investors on December 20, 1999, and it is one of the top low-cost index funds in India. It seeks to replicate the Nifty 50 Index by investing in securities of the Nifty 50 TRI index in the same proportion.
The fund has generated an impressive annualized return of 30.5% in the last three years. However, its 1-year return stands at -0.50%. It has an expense ratio of 0.10% and no exit load. It has an AUM (Assets Under Management of ₹ 644.34 crores. The minimum SIP investment is set at ₹ 100 and the minimum lumpsum investment is ₹ 1000.
Currently, the fund has 99.6% of its holdings in equity and the remaining 0.4% in cash. A majority of its investments are in financial, technology, energy and consumer staples sectors. Its top holdings are Reliance Industries (10.5%), HDFC Bank (9.2%), ICICI Bank (7.8%), Infosys (7.1%), and Housing Development Finance Corporation (6.1%).
Nemish Sheth has been managing the fund since March 2022. He is a B.Com, PGDM (Finance). Prior to joining Bandhan AMC, he worked with Nippon India Asset Management Ltd and ICICI Prudential Asset Management Company Ltd.
Best Low-Cost Index Funds in India #2 – ICICI Prudential Nifty 50 Index Plan Direct-Growth
| Fund Company | ICICI Prudential Asset Management Company | 1-year Returns | -0.7 |
| Date of Inception | October 12, 1993 | 3-year Returns (annualized) | 30.44 |
| Fund Size (AUM in Cr) | 3,977.09 | Expense Ratio | 0.17% |
| No. of Stocks Held | 50 | Exit Load | 0 |
ICICI Prudential Nifty 50 Index Plan Direct-Growth is an index fund launched by ICICI Prudential Mutual Fund. This scheme was made available to investors on October 12, 1993, and it aims to closely track the Nifty 50 TRI index by investing in almost all the stocks and in approximately the same weightage as they represent in the index.
The fund has generated an annualized return of 30.44% in the last three years. However, its 1-year return stands at -0.7%. It has an expense ratio of 0.17% and no exit load. It has an AUM (Assets Under Management) of ₹ 3977 .09 crores. The minimum SIP investment is set at ₹ 100 and the minimum lumpsum investment is ₹ 100.
Currently, the fund has 100% of its holdings in equity. A majority of its investments are in the financial, technology, energy, and consumer staples sectors. Its top holdings are Reliance Industries (10.5%), HDFC Bank (9.2%), ICICI Bank (7.8%), Infosys (7.1%), and Housing Development Finance Corporation (6.2%).
Kayzad Eghlim, a B.Com and M.Com graduate has been managing the fund since 2013. Earlier, he worked with IDFC Investment Advisors, Prime Securities, and Canara Robeco Mutual Fund. Nishit Patel has also been managing the fund since January 2021. He is a B.Com graduate and a Chartered Accountant. Earlier, he worked with ICICI Prudential Asset Management Company.
Best Low-Cost Index Funds in India #3 – SBI Nifty Index Fund Direct-Growth
| Fund Company | SBI Mutual Fund | 1-year Returns | -0.7 |
| Date of Inception | June 29, 1987 | 3-year Returns (annualized) | 30.4 |
| Fund Size (AUM in Cr) | 3324.56 | Expense Ratio | 0.18% |
| No. of Stocks Held | 50 | Exit Load | 0.20% for 0 to 15 days, 0% thereafter |
SBI Nifty Index Fund is an index fund launched by SBI Mutual Fund. This scheme was made available to investors on June 29, 1987, and it invests in all the stocks comprising the Nifty 50 TRI index in the same proportion as their weightage in the index.
The fund has generated an annualized return of 30.4% in the last three years. However, its 1-year return stands at -0.7%. It has an expense ratio of 0.18% and an exit load of 0.20% if redeemed within 15 days. It has an AUM (Assets Under Management) of ₹ 3324.56 crores.
The minimum SIP investment is set at ₹ 500 and the minimum lumpsum investment is ₹ 5,000 for the initial investment and ₹ 1000 for every time an additional lumpsum investment is made.
Currently, the fund has 100% of its holdings in equity. A majority of its investments are in financial, technology, energy and consumer staples sectors. Its top holdings are Reliance Industries (10.5%), HDFC Bank (9.2%), ICICI Bank (7.8%), Infosys (7.1%), and Housing Development Finance Corporation (6.2%).
Raviprakash Sharma and Mohit Jain manage the fund. Raviprakash Sharma is a B.Com (H), Chartered Accountant and CFA (USA). Prior to joining SBI AMC, he worked with HDFC AMC, Citigroup Wealth Advisors, Kotak Securities, Times Investors Services and Birla Sun Life Securities. Mohit Jain is a B.E. (Engineering) and CFA (Level III Candidate). Prior to joining SBI Mutual Fund, he worked with Crisil as a Research Analyst.
Best Low-Cost Index Funds in India #4 – HDFC Index S&P BSE Sensex Direct Growth
| Fund Company | HDFC Asset Management Company | 1-year Returns | 0.9% |
| Date of Inception | December 10, 1999 | 3-year Returns (annualized) | 30.3% |
| Fund Size (AUM in Cr) | 4,210.23 | Expense Ratio | 0.20% |
| No. of Stocks Held | 30 | Exit Load | 0.25% for 0-3 days and 0.00% thereafter |
HDFC Index S&P BSE Sensex Fund is an index fund launched by HDFC Asset Management Company. This scheme was made available to investors on December 10, 1999, and it invests in all the stocks comprising the BSE Sensex index in the same proportion as their weightage in the index.
The fund has generated an annualized return of 30.3% in the last three years and its 1-year return stands at 0.9%. It has an expense ratio of 0.20% and an exit load of 0.25% if redeemed within 3 days. It has an AUM (Assets Under Management) of ₹ 4210.23 crores. The minimum SIP investment is set at ₹ 100 and the minimum lumpsum investment is also ₹ 100.
Currently, the fund has 100% of its holdings in equity. A majority of its investments are in financial, technology, energy and consumer staples sectors. Its top holdings are Reliance Industries (11.9%), HDFC Bank (10.5%), ICICI Bank (8.9%), Infosys (8.1%), and Housing Development Finance Corporation (7.1%).
Arun Agarwal and Nirman Morakhia manage the fund. Arun Agarwal is a B.Com and Chartered Accountant. Prior to joining HDFC Asset Management Company, he worked with SBI Funds Management, ICICI Bank Limited and UTI AMC. Nirman Morakhia has done BMS and MBA-Financial Markets. Prior to joining HDFC Mutual Fund, he worked with Mirae Asset Global Investment Management India Pvt Ltd.
Best Low-Cost Index Funds in India #5 – Motilal Oswal Nifty 50 Index Fund Direct-Growth
| Fund Company | Motilal Oswal Asset Management Co. Ltd | 1-year Returns | -0.6% |
| Date of Inception | December 29, 2009 | 3-year Returns (annualized) | 30.2% |
| Fund Size (AUM in Cr) | 234.01 | Expense Ratio | 0.14% |
| No. of Stocks Held | 50 | Exit Load | 0% |
Motilal Oswal Nifty 50 Index Fund is an index fund launched by Motilal Oswal Asset Management Company. This scheme was made available to investors on December 29, 2009, and it invests in all the stocks comprising the Nifty 50 TRI index in the same proportion as their weightage in the index.
The fund has generated an annualized return of 30.2% in the last three years and its 1-year return stands at -0.6%. It has an expense ratio of 0.14% and no exit load. It has an AUM (Assets Under Management) of ₹ 234.01 crores. The minimum SIP investment is set at ₹ 500 and the minimum lumpsum investment is also ₹ 500.
Currently, the fund has 100% of its holdings in equity. A majority of its investments are in the financial, technology, energy, and consumer staples sectors. Its top holdings are Reliance Industries (10.5%), HDFC Bank (9.2%), ICICI Bank (7.8%), Infosys (7.1%), and Housing Development Finance Corporation (6.2%).
Swapnil P Mayekar manages the fund. He is an M.Com from Mumbai University and holds an advanced diploma in Business Administration from Welingkar Mumbai. Prior to joining Motilal Oswal AMC, he worked with Business Standard.
In Closing
In this article, we took a look at some of the best low-cost index funds in India. We compared them based on parameters like annualized returns, expense ratio, exit load, and more. Passive funds are especially suitable for long-term investors who have a conservative approach.
These funds invest in some of the best companies in the country and replicate benchmark indices. That’s all for this article, folks. We hope to see you around and happy investing until next time.
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