Index Funds in India: Should You Ditch Active Funds?
Index funds in India track benchmarks like Nifty 50 or Sensex and charge expense ratios as low as 0.05–0.20%, versus 1–2% for actively managed equity funds. Over a 10-year horizon, roughly 70–80% of large-cap active funds in India have underperformed their benchmark index after costs, according to SPIVA India data. For a salaried investor with a 15–20 year horizon, a low-cost Nifty 50 index fund is often the single best starting point.
Frequently asked questions
Quick answer
Which is better in India — index fund or active fund?
For large-cap exposure, index funds almost always win over the long term because lower costs compound in your favour. Active funds have a better case in mid-cap and small-cap segments where markets are less efficient and skilled managers can still add alpha.
Which is better in India — index fund or active fund?
For large-cap exposure, index funds almost always win over the long term because lower costs compound in your favour. Active funds have a better case in mid-cap and small-cap segments where markets are less efficient and skilled managers can still add alpha.
What is a good expense ratio for an index fund in India?
Anything below 0.20% is competitive for a Nifty 50 or Sensex index fund in India. Several direct-plan index funds from UTI, HDFC, and Nippon now charge as little as 0.05–0.10%, making them among the cheapest investment products available.
Is Nifty 50 index fund safe for long-term investment?
No equity fund is 'safe' in the short run — Nifty 50 has seen drawdowns of 30–60% during crises like 2008 and 2020. However, over any rolling 10-year period historically, Nifty 50 has delivered positive returns, making it reliable for long horizons of 10+ years.
How do I invest in a Nifty 50 index fund?
You can invest via any SEBI-registered mutual fund platform (Zerodha Coin, Groww, MFCentral, or directly on the AMC website) by choosing a direct-plan Nifty 50 index fund and setting up a SIP or lump-sum purchase. Always pick the Direct plan over the Regular plan to avoid distributor commission.