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Invest in Top Index Mutual Funds In 2022: High Return Mutual Funds In India

Learn all about Index Mutual Funds in India to invest in. Get the returns provided by Index Mutual Funds in 2022, taxation and much more!
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When it comes to investing in large-cap index funds, most investors choose between Sensex 30 Index funds and Nifty 50 Index Funds. While the Sensex Index funds give exposure to India's 30 largest companies by market capitalisation, the Nifty 50 Index funds give exposure to India's 50 largest companies by market capitalisation. It is important to note that there is a lot of overlap between Sensex and Nifty 50 companies. This blog focuses on how to invest in top index Mutual Funds in 2022.

What are Index mutual funds?

The BSE Sensex Index comprises India’s 30 largest companies by market capitalisation. Sensex Index mutual funds invest in all the 30 Sensex companies in proportion to their weightages in the Sensex Index. For example, if a fund manager has Rs. 100, they will distribute it among all the 30 Sensex companies as per their weightage in the index.

As per SEBI guidelines, an index fund has to invest a minimum of 95% of its total assets in the index's constituents it is tracking or replicating. An index fund can maintain the remaining up to 5% balance to meet redemptions and other expenses of the scheme. This balance can be kept as a cash balance in the bank or invested in short-term debt instruments. 

An index fund replicates or tracks the performance of the Sensex 30 Index. The returns of a Sensex Fund are identical to the returns of the Sensex Index. However, the net returns for the investors are slightly lower due to expense ratio and tracking error.

Returns provided by the best Index Fund

Let us look at the returns provided by the best Sensex Index Fund in the last five years.

Scheme nameAUM (Rs. crores)1-year3-years5-years
Nippon India Index Fund24312.27%18.40%16.39%
HDFC Index Fund – Sensex Plan2,99012.23%18.30%16.37%
Tata Index Fund – Sensex11711.69%18.14%16.27%
LIC MF Index Fund – Sensex Plan4412.11%18.14%15.96%
ICICI Prudential Sensex Index Fund46112.05%18.48%NA


Note: The returns are as of 16th Feb 2022. The returns are for direct plans with growth option. The one-year returns are absolute. The three and five-year returns are CAGR. The funds have been ranked based on five-year performance.

The above table shows the best index mutual funds have given returns in the range of 16% CAGR in the last five years.

Who should invest in Sensex funds?

An investor wanting exposure to India’s top 30 companies by market capitalisation can invest in a Sensex fund. Low cost index funds like Sensex funds are one of the best ways to invest in India’s largest companies. These companies have a long track record of growth, good profit margins, consistent dividend payment, and creating shareholder wealth. Investors who are happy with index funds rather than outperforming the index can also consider investing in Sensex funds.

Taxation of Sensex funds

For taxation purposes, Sensex index mutual fund schemes are treated as equity schemes and taxed accordingly.

Short-term capital gains (STCG) tax:

  • If you sell your Sensex Index mutual fund scheme units within twelve months of purchase, the capital gain will be classified as short-term capital gain (STCG). The short-term capital gain (STCG) tax will be levied at 15%.

Long-term capital gains (LTCG) tax:

  • If you sell your Sensex Index mutual fund scheme units after twelve months of purchase, the capital gain will be classified as long-term capital gain (LTCG). Every financial year, the first Rs. 1 lakh long-term capital gain will be exempt from taxation. The incremental long-term capital gain above Rs. 1 lakh will be taxed at 10%.

Risks involved in investing in Sensex funds

When choosing the index funds to invest in, you need to understand the risks involved. As discussed earlier, a Sensex Index fund mirrors or replicates the Sensex 30 Index. So, when the Sensex 30 goes up, the index fund investors will benefit. However, whenever the Sensex 30 falls, the same will reflect in the index fund investors’ returns. So, Sensex 30 Index fund investors are exposed to the risk of the Sensex 30 seeing big falls.

During uncertain times like the 2008 Subprime crisis and the 2020 Covid-19 pandemic, the Sensex 30 Index fell by more than 50%. The Sensex 30 Index fund investors also saw heavy losses in their investment portfolios during that time. However, over time, the Sensex 30 recovered all its losses and went on to make new highs. So, in the long run, the risk of the Sensex 30 index giving negative returns reduces.

Return potential of Sensex mutual funds

The Sensex 30 index has provided excellent returns to its investors in the long run.

Note: The returns are as of 17th Feb 2022.

The above chart shows that the Sensex Index started with a base value of 100 in 1979. As of 17th Feb 2022, Sensex is trading near levels of 58,000. Since its inception, Sensex has created a lot of wealth for its investors. As Sensex funds mirror the Sensex, with such excellent returns over the long run, they will qualify as one of the best index funds to invest in.

In the long run, Sensex Index fund investors have benefited from the magic of compounding. Investors should start a systematic investment plan (SIP) in a Sensex 30 Index fund for their long-term financial goals, such as building a fund for a child's higher education or building a retirement fund. Compounding works wonders in the long run and has the potential to give excellent returns.

Advantages of investing in Sensex index funds

One of the biggest advantages of investing in a Sensex index fund is that you get exposure to a diversified portfolio of India’s 30 largest companies. You get an opportunity to invest in top index funds and earn market returns at a low cost.


If you are a long-term investor looking to create wealth to accomplish financial goals, the Sensex 30 Index fund is an excellent financial product to invest in. Most fund houses offer a Sensex 30 Index fund. You may choose a scheme with a low expense ratio, low tracking error, and a reasonable to high AUM.

To start investing in Sensex 30 index mutual fund schemes as per your appropriate asset allocation, download the Glide Invest App from Google Play Store or Apple App Store and get started.

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