Introduction

As investors increasingly turn to passive investment strategies, index mutual funds continue to grow in popularity. These funds offer a simple yet effective way to gain exposure to broad market indices, ensuring long-term growth potential with lower costs and risk. Whether you are new to investing or a seasoned investor looking to diversify your portfolio, index funds offer an easy entry point.

2025 presents a fresh opportunity to invest in funds that are not only top-rated but also aligned with emerging market trends. Here’s a closer look at some of the best-performing index mutual funds to consider this year.

1.   Tata Nifty MidSmall Healthcare Index Fund-Reg (G)

With an NAV of ₹12.00 as of January 16, 2025, the Tata Nifty MidSmall Healthcare Index Fund focuses on mid and small-cap stocks in the healthcare sector. The fund has a fund size of ₹131.97 crore, making it a solid option for investors looking to benefit from the growth of India’s healthcare industry.

It invests 16.29% in large-cap stocks, 23.28% in mid-cap stocks, and 10.65% in small-cap stocks. This diversified approach helps mitigate risk while capitalising on the growth potential of smaller companies.

2.   Bandhan Nifty IT Index Fund-Reg (G)

For those looking to tap into India's robust IT sector, the Bandhan Nifty IT Index Fund is a top contender. With an NAV of ₹14.1546 and a fund size of ₹28.94 crore as of January 16, 2025, this fund has consistently shown impressive returns. Over the last year, it has delivered a trailing return of 29.3%, and since its launch, it has returned 32.11%.

The expense ratio of 1.02% is reasonable considering the impressive performance, and the fund is easily accessible with a minimum investment of ₹1,000. Whether you're an experienced investor or just starting, this fund's performance makes it a compelling option for those interested in the tech-driven growth of India’s IT sector.

3. Aditya Birla SL CRISIL IBX Gilt April 2033 Index Fund-Reg (G)

This gilt fund offers a more conservative option for risk-averse investors who seek to avoid the volatility often seen in equities. The Aditya Birla SL CRISIL IBX Gilt April 2033 Index Fund focuses on government securities, ensuring a relatively low credit risk. As of January 16, 2025, the NAV is ₹10.97, with a fund size of ₹87.20 crore (as of December 31 2024).

Its expense ratio of 0.47% is among the lowest in the category, ensuring that more of your investment goes toward generating returns. However, keep in mind that gilt funds are sensitive to interest rate fluctuations, so investors should consider their long-term goals when investing in this fund.

4. Kotak Nifty G-Sec July 2033 Index Fund-Reg (G)

With a NAV of ₹11.22 as of January 16, 2025, and AUM worth ₹17.7427 crore as of September 30, 2024, the Kotak Nifty G-Sec July 2033 Index Fund is another excellent choice for conservative investors. This fund focuses on government securities, providing a secure and low-risk investment.

The expense ratio is just 0.39% (as of September 30, 2024), making it one of the most cost-effective options for investors seeking stability. The annualised return of 8.84% over the last year is quite solid, given the low-risk nature of the fund. With a minimum investment of just ₹100, this fund is also highly accessible for investors starting with smaller amounts.

5.   Nippon India Nifty IT Index Fund-Reg (G)

The Nippon India Nifty IT Index Fund is ideal for those who want to focus on the booming IT sector. With a NAV of ₹11.3986 as of January 16, 2025, and a fund size of ₹150.18 crore, this fund has demonstrated strong performance over time. Its trailing return of 17.75% since launch indicates the fund’s solid track record.

The expense ratio stands at a competitive 0.88% (as of December 01, 2024), which is quite reasonable considering the fund’s growth potential. By investing in large-cap IT stocks, this fund is well-positioned to capitalise on the rapid technological advancements and expansion in the IT sector.

6.   ICICI Pru Nifty IT Index Fund-Reg (G)

The ICICI Pru Nifty IT Index Fund is another strong choice for those looking to invest in the IT sector. With a NAV of ₹14.65 as of January 16, 2025, and a fund size of ₹578.59 crore as of September  30, 2024, this fund offers significant exposure to the top Indian IT companies.

The fund has posted an annualised return of  18.68%, showcasing its long-term potential, especially since the IT sector remains a key driver of India's economic growth. The expense ratio of 0.89% (as of December 31, 2024) is on the higher side for an index fund, but the fund’s large size and established reputation offer stability.

7.   Axis Nifty IT Index Fund-Reg (G)

The Axis Nifty IT Index Fund has an NAV of ₹14.58 as of January 16, 2025, with a fund size of ₹141.21 crore as of September 30, 2024. As with other funds in the IT sector, it aims to provide investors with exposure to India’s leading technology companies.

The fund’s expense ratio of 1.03% is slightly higher when compared to some other index funds, but the Axis Mutual Fund house’s strong track record provides confidence to investors. While the sector has experienced volatility in recent times, its long-term growth prospects make this fund an attractive option for those willing to hold through short-term fluctuations.

Conclusion

As we move into 2025, the opportunities within index mutual funds remain abundant. Whether you are interested in high-growth sectors like IT and healthcare or prefer the stability offered by government securities, there’s an index fund suited for every type of investor. Carefully consider your investment goals, risk tolerance, and time horizon when choosing among these top-rated funds. With the right approach, index funds can help you build a well-diversified portfolio that thrives in the long run.

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