Best Index Funds for 2025: A Simple Guide

• Nasdaq 100 and S&P 500 index funds provide Indian investors with international diversification and access to global tech giants.
• UTI Nifty 50 and DSP Nifty Next 50 remain reliable choices for conservative, long-term investors seeking stability.

Investors searching for the best index funds to invest in 2025 will find no shortage of choices. The growing interest in low-cost passive investing has made index funds one of the fastest-growing categories of mutual funds. These funds don’t attempt to beat the market; instead, they simply track well-known indices, such as the Nifty 50, Nifty Midcap 150, and Nasdaq 100. Hence, it gives investors diversification, transparency, and lower costs compared to actively managed funds.

In 2025, many Indian investors are asking the same questions: Which index fund is best for beginners? Which one gives the highest returns? Should I invest in Indian large-cap funds or diversify into the US markets? To help answer these, we’ve analyzed performance, expense ratios, and risk profiles based on ET Money data.

Best Index Funds for 2025

Below is a list of the top-performing index funds across categories: mid-cap, small-cap, international, and large-cap.

Motilal Oswal Nifty Midcap 150 Index Fund

The Motilal Oswal Nifty Midcap 150 Index Fund belongs to the mid-cap category and manages assets worth Rs. 2,472 crore. With an expense ratio of 0.26%, it has generated an impressive annual return of 22.91%.

Investors can begin with a minimum investment of Rs. 500. For those seeking growth opportunities beyond large-cap companies, this fund provides exposure to 150 mid-sized companies that hold strong potential. While returns have been good, investors must be mindful that mid-cap stocks often carry higher volatility compared to large-cap stocks.

Motilal Oswal Nifty Smallcap 250 Index Fund

The Motilal Oswal Nifty Smallcap 250 Index Fund falls under the small-cap index category with an asset base of Rs. 970 crore. It charges an expense ratio of 0.33% and has delivered annual returns of 22.16%.

A minimum investment of Rs. 500 makes it easily accessible. This fund tracks the Nifty Smallcap 250 Index, giving investors exposure to emerging businesses. While it offers high growth potential, small-cap investing requires patience and the ability to withstand short-term market swings.

Motilal Oswal Nasdaq 100 FOF Scheme

The Motilal Oswal Nasdaq 100 FOF Scheme gives investors global exposure by tracking the Nasdaq 100 index. It manages assets worth Rs. 5,775 crore and has a very low expense ratio of 0.21%.

Over the past years, it has delivered returns of 21.97% per annum. This fund provides access to some of the world’s largest technology and growth companies such as Apple, Amazon, and . With no minimum investment barrier mentioned, it stands out as a strong option for those seeking diversification outside India.

Edelweiss US Technology Equity FoF

The Edelweiss US Technology Equity FoF focuses exclusively on the US technology sector and manages assets of Rs. 3,222 crore. It has an expense ratio of 0.71% and has delivered annual returns of 20.91%.

The minimum investment requirement is Rs. 500. While it has consistently provided strong performance, its sector-heavy concentration and higher cost make it better suited as a satellite investment rather than a core portfolio holding.

Motilal Oswal S&P 500 Index Fund

The Motilal Oswal S&P 500 Index Fund gives investors access to the top 500 US companies across sectors, making it one of the most diversified international options. With an AUM of Rs. 3,823 crore, the fund charges an expense ratio of 0.61% and has delivered annual returns of 18.91%. For Indian investors seeking stability through global exposure, this fund provides an ideal balance between growth and diversification.

DSP Nifty Next 50 Index Fund

The DSP Nifty Next 50 Index Fund belongs to the large-cap index category and has an asset size of Rs. 1,047 crore. It comes with an expense ratio of 0.25% and has generated an annual return of 17.62%. Investors can start with as little as Rs. 105. The fund tracks the Nifty Next 50, representing companies just below the Nifty 50 in size and influence. This makes it attractive for those who want exposure to potential future blue-chip stocks.

UTI Nifty 50 Index Fund

The UTI Nifty 50 Index Fund is among the most trusted index funds in India, tracking the Nifty 50 benchmark. It manages a massive Rs. 23,731 crore in assets, with a low expense ratio of 0.19% and annual returns of 13.96%. With a minimum investment requirement of Rs. 500, this fund gives investors exposure to India’s largest and most stable blue-chip companies. It is especially suitable for conservative investors aiming for long-term wealth creation with lower volatility.

Tips For Picking the Right Index Fund In 2025

Here’s how you know which is the right index fund for you:

For Growth Seekers: Mid-cap and small-cap index funds like Motilal Oswal Nifty Midcap 150 and Smallcap 250 offer the highest returns but also carry higher risk.

For Global Diversification: US-focused funds such as Motilal Oswal Nasdaq 100 FOF and the S&P 500 Index Fund provide excellent international exposure.

For Stability: Large-cap index funds like UTI Nifty 50 and DSP Nifty Next 50 remain reliable long-term bets with relatively lower volatility.

Final Thoughts

The best index fund for 2025 depends mainly on an investor’s risk appetite, investment horizon, and diversification goals. Conservative investors can rely on Nifty 50 index funds for stability and security. Meanwhile, aggressive investors may look to mid-cap and small-cap options for higher growth.

Adding a global component through Nasdaq 100 or S&P 500 funds further strengthens portfolio resilience. However, a balanced mix of domestic large caps, growth-oriented mid/small caps, and global index funds will be the way to go for building a rewarding investment portfolio.

 

FAQs

Q1. What are index funds, and why are they popular in India in 2025?

Index funds are mutual funds that replicate the performance of a market index like the Nifty 50 or S&P 500. They have gained popularity in India due to their low costs, simplicity, and ability to deliver consistent market-matching returns, especially compared to higher-cost active funds.

Q2. Which index fund is best for beginners in 2025?

For beginners, large-cap index funds such as the UTI Nifty 50 Index Fund or DSP Nifty Next 50 Index Fund are ideal. They provide exposure to stable blue-chip companies, carry lower volatility, and help new investors build confidence with steady, long-term returns.

Q3. Are international index funds a good choice for Indian investors?

Yes, international index funds like the Motilal Oswal Nasdaq 100 FOF and Motilal Oswal S&P 500 Index Fund are excellent for diversification. They give access to global companies, reduce dependence on the Indian economy, and add balance to a portfolio, though currency risk must be considered.

Q4. What risks are involved in investing in mid-cap and small-cap index funds?

While funds like Motilal Oswal Nifty Midcap 150 and Smallcap 250 deliver higher returns, they also come with greater volatility. Mid and small-cap stocks can face sharper corrections during downturns. Investors must have a higher risk tolerance and long-term investment horizon to manage these swings.

Q5. How can I choose the best index fund for my portfolio in 2025?

Choosing the best index fund depends on your financial goals, risk appetite, and time horizon. Conservative investors should focus on large-cap funds for stability, while aggressive investors can consider adding mid- and small-cap funds. For global diversification, S&P 500 and Nasdaq 100 index funds are recommended.