Index funds have evolved from niche passive vehicles to foundational building blocks for many portfolios. In 2025, as investors look for low-cost, diversified, and reliable options, it’s worth asking: Which are the best index funds in India right now?
What Makes an Index Fund “Best”?
Before jumping into names, let’s clarify the criteria I use to judge an index fund:
| Metric | Why It Matters | Benchmarks / Ideal Range |
|---|---|---|
| Expense Ratio (Cost) | Lower cost means more of the gains stay with you. | 0.05%–0.30% |
| Tracking Error / Deviation | The closer it mimics its index, the better. | Minimal deviation from the benchmark |
| Fund Size / AUM | Size offers stability and better liquidity. | Prefer sizable AUM |
| Index It Tracks | The index determines risk/return profile. | Align index choice with your goals |
| Historical Returns (3-5 yrs) | Past performance gives context (not guarantee). | Strong consistent returns |
| Liquidity & Exit Experience | Easy to buy/sell with minimal slippage or delays. | Seamless redemptions |
Top Index Funds to Watch in 2025
1. Nippon India Index Fund – Nifty 50 Plan (Direct Growth)
A classic large-cap index fund that tracks the Nifty 50. Scores well for low expense ratio and stable, predictable returns. It is ideal for investors who want to match market performance with minimal cost.
2. ICICI Prudential Nifty Next 50 Index Fund
Gives exposure to companies likely to move into Nifty 50. Slightly higher risk but potential for higher reward than pure large-cap funds.
3. Motilal Oswal Nifty Midcap 150 Index Fund
Targets mid-cap companies for growth. A good option for investors willing to take moderate risk for higher returns.
4. Motilal Oswal Nifty Smallcap 250 Index Fund
High-risk small-cap index fund with potential for significant long-term growth.
5. Motilal Oswal Nifty 500 Index Fund
Provides broad market exposure across large, mid, and small caps. Ideal for a balanced investment approach.
6. Motilal Oswal S&P 500 Index Fund
Tracks the U.S. market for global diversification, providing exposure to international equities.
How to Pick Your Best Index Fund
- Define your goal & risk appetite: Large-cap for stability, mid/small-cap for growth, global for diversification.
- Check cost & tracking metrics: Low expense ratios and minimal tracking errors are crucial.
- Ensure fund size & liquidity: Avoid tiny funds that may behave erratically.
- Don’t obsess over short-term rankings: Consistency matters more than the latest topper.
- Go with Direct & Growth option: Avoid distributor commissions and let returns accrue.
Sample Comparison of Top Index Funds (2025)
| Fund | Index Tracked | Expense Ratio | 3-Yr Annualised Return | Risk Profile |
|---|---|---|---|---|
| Nippon Nifty 50 | Large-Cap | 0.07% | 14%-18% | Low–Moderate |
| ICICI Next 50 | Mid-Up Next | 0.31% | 16%-20% | Moderate |
| Motilal Midcap 150 | Mid-Cap | 0.26% | 18%-22% | Moderate–High |
| Motilal Smallcap 250 | Small-Cap | 0.33% | 20%-25% | High |
| Motilal Nifty 500 | Total Market | 0.17% | 15%-19% | Moderate |
| Motilal S&P 500 | U.S. Market | 0.61% | Varies | Moderate–High |
Note: These numbers are indicative and for comparison purposes; actual returns may vary.
Why Users Search “Best Index Funds”
- Performance trends: 1-yr and 3-yr returns influence rankings.
- Cost sensitivity: Expense ratio comparison is critical.
- Category & index clarity: Users want to know exactly which index the fund tracks.
- Fund house and brand trust: Larger, well-known AMCs inspire confidence.
- Ease & liquidity: Simple investment, redemption, and transparency matter.
Final Thoughts
In 2025, the best index funds in India balance low cost, reliable tracking, fund size, and alignment with your objectives. Consistency, transparency, and discipline are more important than chasing short-term returns. Choose the fund that aligns with your goals and risk tolerance for the best long-term outcomes.