Best Index Funds in India 2026

It is often recommended that investors diversify their holdings to build a strong portfolio. One method of diversifying their holdings is investing in index funds.

Index funds are instruments that track an underlying index, such as the Nifty 50 or the Nifty Midcap 50. Their primary objective is to replicate the performance of the underlying index. To deliver identical returns, these funds invest in the index constituents with the same weightage. In this blog, we will look at the best index funds in India based on 3-year annualised returns.

Best Index Mutual Funds in India 2026

Below are the best-performing index funds in India, ranked by 3-year annualised returns -

Note: The above returns are as of April 21, 2026

Overview of Best Index Funds in India 2026

Motilal Oswal BSE Enhanced Value Index Fund Direct Growth

• The minimum SIP amount is ₹500
• 3Y annualised returns of 33.09%
• Carries a very high risk
• Assets under management (AUM) of ₹1,570.4 Cr
• 99.71% of the funds are allocated to equity, while 0.29% held in debt
• Expense ratio of 0.36%

ICICI Prudential Nifty Auto Index Fund Direct Growth

• The minimum SIP amount is ₹1,000
• 3Y annualised returns of 27.08%
• Carries a very high risk
• AUM of ₹190.90 Cr
• 99.76% of the funds are allocated to equity, while 0.24% is held as cash
• Expense ratio of 0.30%

Axis Nifty Smallcap 50 Index Fund Direct Growth

• The minimum SIP amount is ₹100
• 3Y annualised returns of 25.38%
• Carries a very high risk
• AUM of ₹512.37 Cr
• 100.20% of the funds are allocated to equity, while 0.67% is held as debt and -0.87% as cash
• Expense ratio of 0.27%

Aditya Birla Sun Life Nifty Smallcap 50 Index Fund Direct Growth

• The minimum SIP amount is ₹100
• 3Y annualised returns of 25.33%
• Carries a moderately high risk
• AUM of ₹234.13 Cr
• 99.95% of the funds are allocated to equity, while 0.05% is held as cash
• Expense ratio of 0.49%

Kotak Nifty Smallcap 50 Index Fund Direct Growth

• The minimum SIP amount is ₹100
• 3Y annualised returns of 25.20%
• Carries a very high risk
• AUM of ₹170.15 Cr
• 99.54% of the funds are allocated to equity, while 0.46% is held as cash
• Expense ratio of 0.20%

Axis Nifty Midcap 50 Index Fund Direct Growth

• The minimum SIP amount is ₹100
• 3Y annualised returns of 24.68%
• Carries a very high risk
• AUM of ₹565.91 Cr
• 99.72% of the funds are allocated to equity, while 0.82% is held as debt and -0.54% as cash
• Expense ratio of 0.24%

Edelweiss Nifty Midcap150 Momentum 50 Index Fund Direct Growth

• The minimum SIP amount is ₹100
• 3Y annualised returns of 24.09%
• Carries a very high risk
• AUM of ₹1,333.36 Cr
• 99.77% of the funds are allocated to equity, while 0.64% is held as debt and -0.41% as cash
• Expense ratio of 0.43%

Navi Nifty India Manufacturing Index Fund Direct Growth

• The minimum SIP amount is ₹100
• 3Y annualised returns of 23.98%
• Carries a very high risk
• AUM of ₹67.24 Cr
• 99.99% of the funds are allocated to equity
• Expense ratio of 0.41%

Motilal Oswal Nifty Midcap 150 Index Fund Direct Growth

• The minimum SIP amount is ₹500
• 3Y annualised returns of 23.75%
• Carries a moderately high risk
• AUM of ₹2,900.79 Cr
• 99.95% of the funds are allocated to equity, while 0.05% is held as cash
• Expense ratio of 0.23%

Tata Nifty Midcap 150 Momentum 50 Index Fund Direct Growth

• The minimum SIP amount is ₹150
• 3Y annualised returns of 23.67%
• Carries a moderately high risk
• AUM of ₹963.93 Cr
• 100.23% of the funds are allocated to equity, while -0.23% held as cash
• Expense ratio of 0.44%

Factors to Consider While Picking Index Funds

Investment Objective

The primary factor to consider when making any investment decision is the investment's objective. Investors should pick investments that align with their investment goals, time horizon and financial capability. Index funds are suitable for investors who seek returns identical to those of the underlying asset and want to stay invested for the long term.

Risk

Index funds are a great investment option for risk-averse investors. These funds track an underlying index, which reduces the intervention required by fund managers. Further, the best index funds in India are a valuable addition to one’s portfolio, as they help with diversification and mitigate overall risk.

Fund Performance

To choose an index fund with confidence, it is important to know its past and current performance. Investors should select several index funds and compare their performance before choosing one or more to invest in.

Tracking Error

The tracking error is another key factor that investors should consider. Index funds aim to replicate the returns of a particular index. However, due to several factors, the fund may not accurately track the underlying index. The lower the tracking error, the more similar the fund’s returns will be to the underlying asset.

Expense Ratio

The expense ratio is a key part of the costs associated with all funds, including index funds. It comprises the money spent on the fund's management and its operational costs. Although index funds have lower expense ratios than other mutual funds, expense ratios can vary from one index fund to another.

Advantages of Index Funds

Investing in index funds offers several benefits to investors. These include:

• Index funds provide investors with broad market exposure and aid diversification.
• Expense ratio and associated costs are relatively lower in index funds compared to actively managed funds, making them a cost-effective option.
• Since index funds try to replicate the performance of an underlying index, they can deliver consistent returns in the long term.
• By investing in an index fund, an investor can avoid over-concentration in a single stock or sector.

Limitations of Index Funds

Although index funds have several advantages, they also have certain limitations.

• Index funds typically have little to no allocation to debt, which increases the downside risks.
• Fund managers have little control over their funds’ performance, as index funds track the underlying index.
• Since index funds replicate the performance of a particular index, there is no scope to generate higher returns, or alpha, than the underlying index.

Conclusion

Investors looking to build sound portfolios should diversify by including index funds. Index funds are a viable option for investors seeking a low-risk instrument with the potential to generate consistent returns. Comparing index funds based on their 3-year annualised returns can help one pick the best index funds to invest in 2026.