Index Nifty Fund

In today’s financial landscape, understanding the nuances of various investment strategies is essential. With two primary approaches — active and passive investing — it's crucial to know which aligns best with your financial goals. 

Active investing involves selecting individual stocks. Passive investing, on the other hand, simply tracks a benchmark index — this is done via Nifty Index Funds and other options. This approach not only reduces the unsystematic risk but also eases the burden of constant monitoring.

Types of Index Nifty Fund 

You can find various types of Nifty Index Funds to tailor your portfolio as per your risk tolerance and investment goals —

1. Nifty 50 Index Fund: This fund passively mirrors the performance of the Nifty 50 Index, which tracks the top 50 large-cap companies in India.
    
2. Nifty Next 50 Index Fund: Focused on the next 50 companies after the Nifty 50, this fund offers you a diversified equity portfolio that captures growth potential in established firms yet to enter the top tier.
    
3. Nifty 200 Index Fund: Comprising companies from both the Nifty 100 and the Nifty Full Midcap 100 indices, this fund provides a comprehensive view of the Indian stock market by combining large-cap and mid-cap stocks.
    
4. Nifty Smallcap 250 Index Fund: This fund tracks the performance of smaller companies within the Nifty 500 Index. They target high-growth potential in the small-cap segment while diversifying across various sectors.
    
5. Nifty 500 Index Fund: Representing 500 companies based on full market capitalisation, this fund offers extensive market coverage. It encompasses large, mid, and small-cap stocks for balanced exposure.
    
6. Nifty Auto Index Fund: Tracking the performance of the top 15 companies in the automobile sector, this fund is ideal for investors looking to capitalise on growth in India's automotive industry.
    
7. Nifty Bank Index Fund: This fund focuses on the 12 leading banking stocks listed on the NSE. It provides targeted exposure to the financial sector, which plays a critical role in the economy.
    
8. Nifty IT Index Fund: Comprising 10 key stocks from the information technology sector, this fund aims to capture the growth dynamics of one of India's most important industries.

What is Nifty 50 Index Fund?

An Index Nifty 50 Fund invests in the companies that make up the Nifty 50 Index, which includes the 50 largest companies in India by market capitalisation. As well-established leaders in their sectors, they are often referred to as blue-chip companies.

Nifty 50 companies are known for their strong profitability and track record of providing good returns to shareholders — both through regular dividends and capital appreciation. 

This fund closely mirrors the performance of the index, allowing you to gain exposure to the Indian stock market without the need to buy individual stocks. 

Best Nifty 50 Index Funds

Here is the list of best Nifty 50 Index Mutual Funds based on the expense ratio and annualised return of the past 3 years —

Why Invest in Nifty Index Funds?

Nifty Index Funds offer several advantages that make them an attractive option for many investors —

With an SIP, you can start investing with as little as INR 500 (approx. AED 22) at regular intervals.

How To Invest in a Nifty Index Fund?

To invest in an Index Nifty Fund, you have two straightforward routes. Let’s discuss each one in more detail — 

Via a Stockbroker 

Step 1: Open a Trading and Demat Account

Register for a trading and Demat account with a reputable stockbroker. 

Step 2: Complete the Application

To complete your KYC process, fill out the application form by providing personal and professional information. Upload the necessary documents, such as your —

• PAN card
• Aadhaar card
• Proof of age, income, and address

Step 3: KYC Verification

Your stockbroker will process your application. You will then be notified of your successful KYC verification.

Step 4: Access Your Trading Platform

After the application process is completed, you’ll receive a user ID and password. Use these credentials to log into your stockbroker's trading platform.

Step 5: Select a Nifty Index Fund

Navigate to the fund section of the trading interface and choose a particular index fund for Nifty. 

Important: It’s advisable to research the fund’s performance and track record before making a selection. Review all scheme documentation thoroughly.

Step 6: Make Your Investment

Once you’ve selected a particular Index Nifty Fund, you have two options: start a Systematic Investment Plan (SIP) for regular investments or purchase units outright with a lump sum payment.

Note: These steps are mainly for purchasing ETFs. However, many platforms also have their portals to invest in Mutual Funds as well. 

Directly via AMCs 

These steps are primarily for investing in mutual funds directly —

Through an AMC’s Website

1. Visit the official website of your favoured Asset Management Company (AMC).
2. Provide the necessary details and complete the e-KYC process using your Aadhaar and PAN card details.
3. Inform the Asset Management Company (AMC) whether you prefer a one-time purchase or a Systematic Investment Plan (SIP).

Through Mobile Apps

1. Download the mobile app of an AMC.
2. Register by providing your contact information
3. Complete the e-KYC process.
4. Once verification is successful, you can start investing in top Nifty 50 Index Funds via the app.

Taxation for Index Nifty Fund

Nifty Index Mutual Funds invest at least 95% of their money in the Nifty 50 Index. Due to this, they are considered equity-oriented mutual funds for tax purposes. This means they follow the same tax rules as other equity funds. 

So while you can certainly benefit from the growth potential of the overall stock market, you will also need to pay tax at the same rate.

Here are the new tax rules for index funds in 2024 —

Frequently Asked Questions