How to choose the right index fund

Index investing in India has exploded in popularity over the past few years. In February 2020, the total assets under management (AUM) of index funds stood at just Rs 7,930 crore. Fast forward to February 2025, and this number has surged to a staggering Rs 2,68,488 crore, reflecting the growing investor preference for low-cost, passive investing. With this surge, the range of index funds available has also expanded significantly. Earlier, investors had only a handful of options - primarily Nifty 50 and BSE Sensex index funds. Today, there are over 300 index funds tracking a diverse range of indices, including: Broad market indices: Nifty 50, Sensex, Nifty 500, Nifty Next 50 Factor-based indices: Nifty Alpha Low Volatility 30, Nifty 200 Momentum 30 Sectoral indices: Nifty Bank, Nifty IT, Nifty Pharma Thematic indices: Nifty India Consumption, Nifty Infrastructure International indices: S&P 500, Nasdaq 100, Hang Seng Despite this growing variety, the core idea behind investing in an index fund remains the same: to gain exposure to a well-diversified baske

This article was originally published on March 17, 2025.