Investing in Nifty 50: Best Index Funds to Buy

Want to grow your wealth without breaking a sweat?  

Investing in Nifty 50 index funds is like hopping onto a steady train that boats along with India’s top 50 companies.  

For Indian investors, especially beginners, these funds are a solid choice for passive investing, low effort, decent returns, and a lot less stress than picking individual stocks. 

This article explains the best Nifty 50 index funds to invest in India, breaks down why they’re great for your personal finance goals, and highlights what you need to know about risks and comparisons.  

Read also: Investing for Beginners: Start with Just ₹500 in India

Why Choose Nifty 50 Index Funds? 

The Nifty 50 index tracks the top 50 companies listed on the National Stock Exchange (NSE), like Reliance Industries, HDFC Bank, and TCS.  

These are the big daddies of the Indian stock market, spread across sectors like finance, IT, and energy. Investing in a Nifty 50 index fund means you’re betting on India’s economic growth without the hassle of researching individual stocks. 

Why’s this perfect for Indian investors?  

It’s simple, cost-effective, and offers diversification. Instead of putting all your paisa in one stock, you spread the risk across 50 blue-chip companies. Plus, these funds are passively managed, so the expense ratios are lower than actively managed funds-more returns stay in your pocket! 

Top Nifty 50 Index Funds to Consider in 2025 

Here’s a curated list of some of the best Nifty 50 index funds in India for 2025, based on factors like expense ratio, tracking error, and assets under management (AUM).  

Data is sourced from reliable platforms like Moneycontrol and AMFI as of March 2025.

Note: Past performance doesn’t guarantee future returns. Always check the latest data before investing. 

Why Investing in Nifty 50 Stand Out 

• UTI Nifty 50 Index Fund: A veteran in the game, this fund has a solid track record and a massive AUM, showing investor trust. Its low expense ratio makes it a top pick for long-term wealth creation. 

• HDFC Index Fund Nifty 50 Plan: Known for consistent performance, this fund is great for those who want reliability with a slightly higher AUM. 

• ICICI Prudential Nifty 50 Index Fund: With a diversified portfolio (33.25% in finance, 13.75% in tech), it’s a go-to for beginners seeking stability. 

• SBI Nifty Index Fund: A budget-friendly option with decent returns, perfect for those starting small. 

• Bandhan Nifty 50 Index Fund: The lowest expense ratio in the bunch, making it a cost-effective choice for cost-conscious investors. 

Key Factors to Compare When Choosing a Fund 

Picking the right Nifty 50 index fund isn’t just about returns. Here are the main things to keep an eye on: 

Expense Ratio 

This is the annual fee charged by the fund house. Lower is better, as it means more of your returns stay with you. For example, Bandhan’s 0.10% expense ratio is a steal compared to actively managed funds that can charge up to 2%. 

Tracking Error 

This measures how closely the fund mirrors the Nifty 50 index. A lower tracking error (e.g., 0.05% for ICICI Prudential) means the fund’s returns are almost identical to the index. High tracking errors can eat into your profits. 

AUM (Assets Under Management) 

A higher AUM, like UTI’s ₹18,345 crore, indicates investor confidence and better liquidity. Smaller AUM funds might be riskier but can still be good if other metrics align. 

Investment Horizon 

Investing in Nifty 50 index funds shine for long-term goals (5+ years), like saving for a house or retirement. Short-term investors might face volatility, so plan accordingly. 

Risks of Investing in Nifty 50 Index Funds 

No investment is 100% safe, and Nifty 50 index funds are no exception. Here’s what to watch out for: 

• Market Volatility: Since these funds track the Nifty 50, they’re tied to market ups and downs. If the index tanks, so does your fund. 

• No Outperformance: Unlike actively managed funds, index funds won’t beat the market. They just match it, minus fees. 

• Sector Concentration: The Nifty 50 has heavy exposure to finance (33%) and IT (13%). If these sectors dip, your returns could take a hit. 

To manage risks, consider a Systematic Investment Plan (SIP) to average out market fluctuations. For example, investing ₹5,000 monthly in a Nifty 50 fund can smooth out the ride over time. 

How to Start Investing in Nifty 50 Index Funds 

Ready to jump in? Here’s the quick and easy way to get started: 

1. Open a Demat Account: Platforms like Zerodha, Groww, or INDmoney. 
2. Complete KYC: Submit your PAN, Aadhaar, and bank details online. 
3. Choose a Fund: Compare expense ratios, tracking errors, and AUM using tools like Tickertape. 
4. Invest via SIP or Lump Sum: Start with as little as ₹100/month for SIPs or go big with a lump sum. 
5. Monitor Periodically: Check your fund’s performance annually, but don’t obsess over daily fluctuations. 

Pro tip: Use a SIP calculator on platforms like Groww to estimate returns. For instance, ₹5,000 monthly in a fund with a 12% CAGR could grow to ₹12.5 lakh in 10 years.  

Investing in Nifty 50 vs Sensex Index Fund: Which is Better? 

Choosing between Nifty 50 and Sensex index funds depends on your goals.  

Nifty 50 tracks 50 diverse companies across 13 sectors, offering broader exposure, while Sensex follows 30 blue-chip firms, heavily weighted towards finance (35%).  

Nifty 50 funds, like UTI Nifty 50 Index Fund, often have lower expense ratios (e.g., 0.21%) and slightly better diversification.  

Sensex funds, such as HDFC Sensex Index Fund, may appeal for stability but have higher sector concentration.  

For beginners, Nifty 50 funds are generally better for balanced growth. 

Returns of Nifty 50 Index Funds Over the Last 5 Years 

Over the past five years (2020-2025), Nifty 50 index funds have delivered solid returns, averaging 12-15% CAGR, per Moneycontrol. Funds like ICICI Prudential Nifty 50 Index Fund posted ~14.5% CAGR, driven by India’s economic recovery. 

Conclusion 

Investing in Nifty 50 index funds is a smart, low-effort way to build wealth for Indian investors.  

With low costs, diversification, and exposure to India’s top companies, these funds are perfect for beginners and long-term investors alike.  

Compare funds based on expense ratios, tracking errors, and AUM to pick the best fit for your goals.  

Stay invested for the long haul, and let the market do the heavy lifting. Ready to take the plunge? Start small, stay consistent, and watch your money grow! 

Disclaimer