Index funds have gone from a niche product to the fastest-growing category in Indian mutual funds. In 2025, passive funds crossed ₹10 lakh crore in AUM for the first time. Here's why — and how to get started.
What is a Nifty 50 index fund?
A Nifty 50 index fund simply buys all 50 stocks in the Nifty 50 index in the same proportion as the index. When Reliance is 10% of the Nifty, the fund holds 10% in Reliance. No fund manager decides what to buy or sell — the index does.
Why passive beats active (most of the time)
Over the last 10 years, roughly 70% of large-cap active funds have underperformed the Nifty 50 index after fees. The reason is simple: fees compound just like returns. A 1.5% expense ratio on an active fund vs 0.1% on an index fund means the active fund needs to outperform by 1.4% every year just to break even — consistently, over decades.
How to choose an index fund
Look for: low expense ratio (under 0.15%), low tracking error (under 0.05%), and a large AUM (over ₹5,000 crore for liquidity). The top options in 2026 include funds from UTI, HDFC, and Nippon — all with expense ratios under 0.10%.
Getting started
You can start a SIP in a Nifty 50 index fund with as little as ₹500 a month through any major mutual fund platform. Set it up, automate it, and resist the urge to check it daily. Time in the market beats timing the market — every time.