The volatile equity markets have led informed mutual fund investors to significantly increase their investments in index funds and equity-oriented exchange-traded funds (ETFs), especially during sharp market downturns attributed to global events.
In March, for instance, investors poured ₹23,820 crore into domestic equity ETFs and an additional ₹6,415 crore into equity-oriented index funds, taking advantage of a market crash driven by geopolitical tensions in West Asia. During that month, both the Sensex and Nifty 50 plummeted approximately 11 percent, marking their worst monthly performance since the pandemic-induced sell-off in March 2020. This market correction eroded nearly ₹41 lakh crore in investor wealth, primarily due to escalating conflicts in West Asia, rising inflation from surging crude oil prices, and aggressive foreign investor outflows.
However, both indices have since rebounded. The Sensex fell from 81,287 points in February to 71,948 points in March, recovering to 76,913 points in April, while the Nifty 50 showed a similar recovery trend. Following record inflows in March, domestic equity ETFs attracted investments of ₹9,668 crore, while equity index funds received ₹10,218 crore in April.
Experts suggest that investing in mutual funds that mirror the Sensex or Nifty 50 indices provides a solid long-term strategy, offering exposure to the top 50 companies. With the equity markets gradually improving, it is advisable for investors to consider top index funds instead of attempting to time the market.
D.D. Sharma, Managing Director of MF King, stated that index funds represent a safer investment option, as they comprise major companies regarded as the backbone of the Indian economy. Since indices are rebalanced every six months, index fund investors benefit from automatic rebalancing, diversification, and lower costs.
Nifty 50 index mutual funds are low-cost, passively managed funds investing in the top 50 large-cap companies listed on the National Stock Exchange (NSE), closely mirroring the performance of the Nifty 50 index. The returns of these funds are market-related and feature low expense ratios, thereby enhancing net returns for investors, as noted by Sandeep Chawla, an independent mutual fund distributor.
The expense ratios for these funds range from 0.02 percent to 0.20 percent. Among major fund houses, Nippon Mutual Fund’s Nifty fund charges a 0.07 percent expense ratio, with Motilal Oswal Mutual Fund and Axis Mutual Fund charging 0.12 percent and 0.17 percent on their Nifty 50 Index Fund, respectively. The Nippon India Index Fund – Nifty Plan has achieved a five-year rolling compound annual growth rate (CAGR) of approximately 18.38 percent, with returns from other fund houses generally falling within a similar range as they invest in the same stocks.
Published on May 22, 2026.
