Index Funds
Low-cost passive funds that copy an index like Nifty 50 or Sensex.
Updated 27 September 2026 · SEBI rules as of 2026Overview
Index funds replicate a market index and aim to match — not beat — its return, minus costs. Because there is no stock-picking, expense ratios are low: under the SEBI (Mutual Funds) Regulations, 2026, the base expense ratio for index funds and ETFs is capped at 0.90% (excluding statutory levies), and many charge far less.
| Particular | Details |
|---|---|
| Strategy | Passive — replicate the index |
| BER cap | 0.90% (excl. statutory levies) |
| Key metric | Tracking error / tracking difference |
| Popular indices | Nifty 50, Sensex, Nifty Next 50, Nifty Midcap 150, Nifty Smallcap 250, Nifty 500 |
| Demat | Not required (unlike ETFs) |
Why index funds
Tiny expense ratios compound into large savings.
No bets that can go wrong.
Portfolio mirrors the index.
Easy core holding for SIPs.
Index fund vs ETF
| Feature | Index fund | ETF |
|---|---|---|
| Buy/sell | From AMC at NAV | On exchange at market price |
| Demat | Not needed | Needed |
| SIP | Easy | Via broker |
| Cost | Slightly higher | Lowest |
| Liquidity | Always at NAV | Depends on volumes |
Check before investing
- Tracking error and tracking difference
- Expense ratio (direct plan)
- Index choice matches your goal
- Fund size and liquidity
Plan your investment
Frequently asked questions
Can an index fund beat the market?
No — it aims to match the index; costs make it slightly lower.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Information is educational and may change with SEBI / tax rules — verify with the AMC, AMFI or SEBI. FinancePortal is not an investment adviser.