Best Nifty Index Funds in India 2022

Eager to find the Best Nifty Index Funds in India 2022 for your investment? 

Right, here is the Best Nifty Index Funds in India 2022 list, along with the complete details you need to know before investing in. 

Best Nifty Index Funds in India 2022

1. ICICI Prudential Nifty Index Fund 

ICICI Prudential is the first best nifty index fund in India 2022. This open-ended fund launched on Jan 1, 2013. You can start investing in this fund at any time. The total AUM 2022 for this Scheme is Rs 2243.32 crores. NAV as of 03 Dec 2022 is Rs 174.0395. 

Investment objective: The fund's objective is to replicate/track the returns of the S & P Nifty index.

Where does the scheme invest: 99.71% in equities and 0.29% in cash & cash equivalents. The fund largely invests 100% in large-cap companies following a growth-oriented investing style.

Benchmark: NIFTY 50 Total Return Index (TRI)

Expense ratio: 0.17%

Risk: Moderately High

Suggested Investment Horizon: >3 years

One-Time Investment Returns in the last 5 years: 

Absolute Returns: 120.52%

Annualised Returns: 17.12%

2. UTI Nifty Index Fund

The UTI nifty index fund in India was launched on Jan 2, 2013. The total AUM 2022 for this scheme is 5380.08 crores. The current NAV is Rs 115.5983. 

Investment objective: The fund's objective is to follow the Nifty 50 Index to achieve equivalent returns.

Where does the scheme invest: The fund asset allocation – 100.21% in equities and -0.18% in cash and cash equivalents. The top ten equity holdings form 58.48% of the assets, and the top three sectors form 68.06% of the assets.

Benchmark: Nifty 50 TRI 

Risk: High

Expense ratio: 0.2%

Suggested Investment Horizon: >3 years

One-Time Investment Returns in the last 5 years: 

Absolute Returns: 122.79%

Annualised Returns: 17.35%

3. HDFC Nifty Index Fund  

The HDFC Nifty fund was launched on Jan 1, 2013. The total AUM 2022 for this scheme is 4084.93 crores. NAV as of 03 Dec 2022 is Rs 160.9972. 

Investment objective: The fund objective is to provide returns equivalent to the NIFTY 50 Index.

Where does the scheme invest: The scheme asset allocation comprises 99.78% equities and 0.22% cash & cash equivalents. The top ten equity holdings form 58.24% of the assets, and the top three sectors form 67.78% of the assets.

Benchmark – Nifty 50 TRI 

Expense ratio: 0.2% 

Risk: Moderately High

One-Time Investment Returns in the last 5 years: 

Absolute Returns: 122.11%

Annualised Returns: 17.28%

4. SBI Nifty Index Fund 

The AUM of the SBI Nifty Index Fund in India is Rs 1,608.84 Crs. The current NAV is Rs 153.8028. 

Investment objective: Investing in all the stocks forming the Nifty 50 Index in the weightage in the index.

Where does the scheme invest: Asset allocation – Large Cap Investments: 89.53%, Mid Cap Investments: 0.63% and others than small-cap: 9.45%

Benchmark – Nifty 50 TRI 

Expense ratio – 0.18%

Risk: Very High

One-Time Investment Returns in the last 5 years: 

Absolute Returns: 120.40%

Annualised Returns: 17.10%

5. LIC MF Nifty Index Fund  

The LIC MF Nifty Index fund was launched on Jan 1, 2013. The fund size is Rs 52.95 crores. NAV as of 03 Dec 2022 is Rs 99.0846. 

Investment objective: The fund aims to generate returns equalized with the index Nifty.

Where does the scheme invest: Asset allocation – Large Cap Investments: 89.78%, Mid Cap Investments: 0.63% and others than small-cap: 9.48%

Benchmark – Nifty 50 TRI 

Expense ratio – 0.21%

One-Time Investment Returns in the last 5 years: 

Absolute Returns: 116.92%

Annualised Returns: 16.73%

A Quick Comparison 

Let us look at the SIP annualized returns for 3 years and 5 years: 

Fund Name3 Years SIP Annualised Returns5 Years SIP Annualised Returns
ICICI Prudential Nifty Index Fund – Direct Plan-Growth24.65%18.19%
UTI Nifty Index Fund – Direct Plan-Growth24.71 %18.33 %
SBI Nifty Index Fund – Direct Plan-Growth 24.4 %18.04%
HDFC Index Fund – Direct Plan – Nifty 50 Plan 24.56 %18.22%
LIC MF Index Fund – Nifty Plan – Direct Plan-Growth24.21 %17.79%

Mutual fund investing depends on your risk preferences and investment goals mainly. An investor with a low-risk profile ideally chooses index funds and expects predictable returns in the long run. If you want to avoid risks associated with actively managed equity funds, you can go with Sensex or Nifty index funds. 

These Nifty index funds can provide you with returns equivalent to actively managed funds in the short run. Let us look closely at index funds and their suitability for investors as index fund investing is not immune from losses if the markets downturns.

What are Index Funds? 

Index Mutual Funds follow a stock market index, like Nifty, Sensex, etc. These are passively managed funds and need not be extensively researched, like actively managed funds. The fund manager does not actively select the stocks but invests in the stocks present in the underlying index.

Suppose an Index Fund is following the NSE Nifty Index. The fund will include 50 stocks in its portfolio in the exact proportion as the index. An index can consist of equity and equity-related securities and bonds. It tries to match the returns provided by the underlying index.

Benefits of Investing in Index Mutual Funds 

  • The Expense Ratio is low, generally 0.50%, as these funds are passively managed. 
  • An index mutual fund is one of the best options for effective risk distribution as it diversifies your investments across multiple industrial sectors.
  • Indexes add the quality stock (outperformers) only. Therefore, index funds are quality investments.

Suitability for Index Funds 

Investors can select index mutual funds based on a determined investment horizon, financial goal, and risk appetite. Index mutual funds are ideal for risk-averse investors ready to invest for at least 5 years. Investors who want higher returns than fixed deposits can invest in index funds. 

Taxability 

If you sell the fund units after 1 year from the purchase date and gain exceeds 1 lakh, it will be considered long-term capital gain and taxable @ 10%. If you sell the units within 1 year from the purchase date, the gain will be considered a short-term capital gain, and the tax rate will be 15%. Also, if dividend income exceeds Rs 5,000 in a year, TDS @10% will also be deducted.

Frequently Asked Question (FAQs) 

What are the risks involved in Index Funds?

Tracking errors: As Index Funds simply mimic a market index like Sensex and Nifty, they carry lower market risk than actively managed funds. Fund managers necessarily invest in all the index securities in the same proportion to provide aligned returns to the index. Therefore, the returns from index funds are subject to tracking errors. They can not add an undervalued stock or remove an overvalued stock to take advantage of the market. 

Transaction cost: When an index alters the composition with addition or removing some securities, it does not incur any cost. But when an index fund mirrors that of the index, it has to bear transaction costs to change the portfolio composition that affects the fund’s returns.

Time lag: Practically, most index funds lag their benchmark returns due to tracking errors. When an index changes the security composition or weightage of individual security, there is a high possibility of time lag. It affects the Index Fund’s return negatively. 

What should an investor consider while investing in Index funds? 

Index funds have some cons due to the passive style of investing. These funds do not offer flexibility to manage market downsides. An index fund has to follow the benchmark during bull and bear runs. An active fund manager has the flexibility to choose stocks in unfavorable market conditions and manage the downside. But an index fund is bound to follow the benchmark, even during market downs.

Can investors switch from one fund to another?

An open-ended fund allows investors to exit and invest within the same fund house or another house. You can move to the scheme within the same fund by filling up a switch form. The settlement period is quick as the funds do not move out of the house. It requires you to meet the prescribed minimum investment criteria. Investors need to bear exit-load and capital gains tax. 

On the other hand, if you switch a fund house to another fund house, it is treated as selling your investments. In this case, you need to apply for redemption from the existing fund and wait for proceeds credit in your bank account. Make sure you consider exit loads and tax treatment before you redeem the investments. To switch efficiently, you can seek help from fund advisors and invest in suitable funds within your time horizon.

How will I evaluate my risk profile?

Risk Profiling is crucial before investing as every investor is unique concerning investment objectives and risk. An investor needs to answer the questions about ability and readiness to take the risk. Investors can seek help from an investment advisor to evaluate their risk profile.

What is the Scheme Information Document issued by AMCs?

An Asset Management Company (AMC) issues three important documents with the approval of the SEBI (Securities and Exchange Board of India) that every investor should go through before investing in mutual funds: Scheme Information Document (SID), Key Information Memorandum (KIM), and Statement of Additional Information (SAI). 

The SID consists of investment objectives and policies, asset allocation, charges and liquidity provisions, the fund management team, risk involved in the scheme, risk mitigation mechanism, past performance, benchmark, AMC branches, etc.

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