BAJAJ ASSET MANAGEMENT LIMITED.
BAJAJ ASSET MANAGEMENT LIMITED.
Grow your wealth over time with Bajaj Finserv AMC Index Funds through simple, diversified, and cost-efficient passive investing.
Our schemes follow diverse investment strategies like megatrend investing, moat investing and more
AdvantageAll investments are driven by our in-house investment philosophy, InQuBe, a combination of the Information Edge, Quantitative Edge and Behavioural Edge.
Through our unique investment approach, we aim for market-beating returns in the long term.
SIP and lumpsum options in many schemes start with as little as Rs. 500
Index funds are a type of passively managed mutual fund that aims to track the performance of a specific market index, such as the Nifty 50 or BSE Sensex. Instead of selecting stocks based on market predictions, an index fund invests in the constituent securities of its underlying index in the same proportion as the index itself. This approach seeks to replicate the performance of the chosen index, subject to tracking error.
Unlike actively managed mutual funds, where the fund manager actively buys and sells securities in an attempt to outperform the market, index funds follow a passive investment strategy. Since there is minimal active stock selection, these funds generally have lower expense ratios.
If the value of the underlying index rises, the value of the index fund’s portfolio may also increase. Similarly, if the index declines, the fund’s value may fall. Rather than trying to beat the market, index funds seek to match the returns of the index they track, subject to tracking error.
For investors looking for a simple, diversified and cost-effective way to participate in the market, index mutual funds can be a convenient option with the potential to support long-term wealth creation.
Index funds are passively managed mutual funds that aim to replicate the performance of a specific benchmark index, such as the Nifty 50 or BSE Sensex. They do this by investing in the same securities as the underlying index, generally in the same weightage or proportion.
Instead of trying to outperform the market through active stock selection, index funds simply seek to track the index. As the benchmark is periodically reviewed and its constituents or weightages change, the fund manager updates the portfolio to mirror those changes.
As per the Securities and Exchange Board of India (SEBI), index funds are required to invest at least 95% of their assets in the securities of the index they track.
The fund’s performance may not exactly match that of the underlying index. Differences can arise due to factors such as expense ratio, cash holdings, transaction costs, dividend reinvestments and the size of the fund. This difference is known as the tracking error. Generally, a lower tracking error indicates that the fund is replicating its benchmark more closely.
The features of index funds explain how they are structured and managed:
Passive investment strategy
Index funds follow a passive investment approach and aim to replicate the performance of a benchmark index. They do not try to outperform the market through active stock selection.
Benchmark-based portfolio
The fund invests in securities that are part of the underlying index, generally in the same proportion. For example, a Nifty 50 index fund will aim to hold the 50 stocks that make up the Nifty 50 Index.
Lower portfolio turnover
Index funds usually buy or sell securities only when the benchmark index changes. This leads to lower portfolio turnover compared to actively managed funds.
Tracking error
The fund’s return may not exactly match the index return due to expenses, cash holdings, transaction costs or operational factors. This difference is called tracking error.
Transparent holdings
Since index funds replicate a publicly available index, investors can easily know which securities the fund holds. This makes the portfolio structure simple and transparent.
Different types available
Index funds can track equity indices, debt indices, international indices, sectoral indices or thematic indices. This gives investors a choice based on their goals, risk appetite and preferred market exposure.
Index funds can be useful for investors who want a simple, low-cost way to participate in market-linked growth over the long term:
Lower cost of investing
Index funds are passively managed, so they usually involve lower fund management costs than actively managed mutual funds. A lower expense ratio can help reduce the overall cost of staying invested.
Diversification through one investment
An index fund gives exposure to a basket of securities through a single fund. This helps spread risk across multiple companies and sectors instead of depending on one or two stocks.
Reduced stock-selection risk
Since index funds follow a predefined benchmark, the fund manager does not actively choose stocks based on personal views or market calls. This reduces the impact of fund manager bias or stock-selection errors.
Suitable for long-term goals
Index funds can be considered by investors planning for long-term goals such as retirement, children’s education or wealth creation. Staying invested for longer periods may help investors benefit from compounding, though returns are not guaranteed.
Simple for new investors
Index funds are easy to understand because they track a known market index. This makes them suitable for investors who prefer a straightforward and relatively hands-off investment approach.
Index funds can be grouped based on the type of benchmark index they track. Here are the common types of index funds available in India, arranged based on their popularity and investor preference:
Market capitalisation index funds
Market capitalisation index funds are commonly available index funds that track companies based on their size, such as large cap, mid cap or small cap. You’ll often see examples like the Nifty 50 or Sensex, which include some of the biggest companies in the market.
Broad market index funds
Broad market index funds track indices that represent a large part of the stock market, such as the Nifty 500. They give you exposure to many sectors and company sizes in one go, making it a simple way to diversify.
International index funds
International index funds track global indices such as the Nasdaq 100 or S&P 500. They let you invest in companies outside India, helping you spread your investments across different countries.
Sectoral index funds
Sectoral index funds track indices linked to a specific sector such as banking, IT, healthcare, FMCG or infrastructure. They can be useful if you want to focus on one industry, but keep in mind they can be a bit riskier due to limited diversification.
Thematic index funds
Thematic index funds invest based on a broader investment theme such as ESG, tourism, consumption, artificial intelligence or renewable energy. These funds pick companies across sectors that fit the theme, so you can invest in ideas you believe in.
Factor-based index funds, also called smart beta index funds, follow indices built using factors such as value, momentum, quality, low volatility or growth. They use a rules-based approach to try and improve returns or manage risk compared to traditional indices.
Equal weight index fundsEqual weight index funds give the same weight to each stock in the index, regardless of the company’s market size. This means smaller companies get as much importance as larger ones, which can change how the fund performs.
Debt index fundsDebt index funds, also known as bond index funds, track fixed-income indices made up of government securities, corporate bonds, PSU bonds or other debt instruments. Debt index funds may be suitable for investors seeking exposure to fixed-income securities through passive investing.
Strategy index funds
Strategy index funds track indices built using specific investment strategies or quantitative models. For example, some may shift between equity and debt based on market conditions or valuation levels.
Custom index funds
Custom index funds track specially designed indices based on specific rules, sectors or investment preferences. These are created to meet specific goals, so they may not follow the usual market indices you often hear about.
Index funds may be suitable for different types of investors depending on their financial goals, risk appetite and investment approach:
• Index funds may be suitable for investors who are just starting out, as they follow a simple and easy-to-understand approach.
• Investors with a long-term horizon may find index funds suitable, as they aim to reflect overall market performance over time through passive investing.
• Since index funds track a specific benchmark index, they may be suitable for investors who are comfortable with market-linked returns.
• Keeping costs low can be easier with index funds, as they usually have lower expense ratios than actively managed funds.
• A preference for a hands-off investment style can make index funds a convenient option, since they follow a set benchmark and don’t require frequent monitoring.
Those looking to spread investments across different companies and sectors can use index funds to achieve diversification through a single investment.
Before investing in index funds, it is important to evaluate a few factors to ensure they align with your financial goals and investment strategy:
Financial goals
Choose an index fund that matches your financial goals, whether you are investing for wealth creation, retirement, education or any other long-term objective.
Investment horizon
Index funds are generally better suited for investors with a long-term investment horizon, as markets can be volatile over shorter periods.
Risk tolerance
Although index funds offer diversification, they remain market-linked investments and their value can rise or fall with the underlying index.
Tracking error
A lower tracking error indicates that the fund is replicating its benchmark index more closely, making it an important factor when comparing index funds.
Expense ratio
Even a small difference in the expense ratio can affect long-term returns, so it is worth comparing costs before investing.
Liquidity and exit load
Check whether the scheme has an exit load and ensure its redemption terms are suitable for your liquidity needs.
Benchmark index
Understand which benchmark index the fund tracks, as different indices provide exposure to different market segments, sectors and levels of risk.
Bajaj AMC’s Index Funds offer a simple and efficient way to invest in India’s equity markets through passive strategies:
• Cost-efficient investing: With a passive strategy, these funds typically have lower expense ratios than actively managed equity funds, which may help reduce the overall cost of investing.
• Transparent and rules-based approach: Investments are made based on predefined index compositions, ensuring clarity and consistency in portfolio construction.
• Broad market exposure: By tracking established indices, these funds provide diversified exposure across sectors and leading companies in the market.
• Minimal tracking difference: The funds aim to closely replicate the performance of their respective benchmark indices, subject to tracking error.
• Suitable for long-term goals: The disciplined and systematic investment approach may support long-term wealth creation aligned with your financial objectives.
Getting started with an index fund is simple when you follow these basic steps:
1. Decide which type of index fund suits your financial goals, such as a large-cap, broad market, sectoral, international or debt index fund.
2. Compare different index fund schemes based on factors such as the benchmark index, tracking error, expense ratio and the credentials of the asset management company (AMC).
3. Complete your KYC requirements if you are investing in mutual funds for the first time.
4. Choose whether you want to invest through a one-time lumpsum investment or a Systematic Investment Plan (SIP).
5. Invest through the asset management company, a mutual fund distributor or an authorised online investment platform by selecting your preferred index fund scheme.
Review your investment periodically to ensure it continues to align with your financial goals and investment horizon.
Understanding the available index fund options can help you make more informed investment decisions:
Bajaj Finserv Nifty 50 Index Fund
The Bajaj Finserv Nifty 50 Index Fund is designed to mirror the performance of the Nifty 50 Total Return Index (TRI) by investing in the same set of companies that make up the index. It tracks the Nifty 50 TRI as its benchmark, was launched on 15 May 2025, and lets you start investing with a minimum SIP of ₹500.
Since it follows a passive investment approach, the expense ratio is generally lower compared to actively managed equity funds. The fund aims to stay closely aligned with the index by keeping tracking difference low and avoiding active stock picking. This may make it suitable for investors seeking long-term wealth creation potential through a simple, passive approach.
Bajaj Finserv Nifty Next 50 Index Fund
The Bajaj Finserv Nifty Next 50 Index Fund is designed to mirror the performance of the Nifty Next 50 Total Return Index (TRI), with some minor tracking differences. It does this by investing in the same set of companies that make up the index. Launched on 12 May 2025, the fund has a minimum SIP amount of ₹500.
This fund provides exposure to emerging large cap companies, which are businesses that could potentially move into the Nifty 50 as they grow. At the same time, it offers a good mix of sectors, helping you stay diversified. Since it follows a passive, rules-based approach, there is no active stock picking involved. The fund simply aims to track the index and support long-term wealth creation potential.
Understanding the key costs associated with index funds helps investors make informed passive investing decisions:
Expense ratio
The expense ratio is the annual fee charged for managing and operating the fund, and it is generally lower for index funds because they follow a passive investment strategy.
Exit load
Some index funds may charge an exit load if you redeem your units within a specified period, so it is important to check the scheme documents before investing.
Direct plan and regular plan costs
Direct Plans generally have a lower expense ratio because they do not include distributor commissions, while Regular Plans include such costs as part of the expense ratio.
Tracking error
Tracking error is not a direct fee, but it shows how much the fund’s performance differs from its benchmark due to costs, cash holdings, transaction costs or operational factors.
The tax on index funds depends on the type of index fund you invest in and how long you hold your investment before redeeming it:
Equity-oriented index funds
If you invest in an equity-oriented index fund, your capital gains are taxed based on the holding period.
| Holding period | Tax treatment |
| Up to 12 months | Short-Term Capital Gains (STCG) are taxed at 20%. |
| More than 12 months | Long-Term Capital Gains (LTCG) exceeding ₹1.25 lakh in a financial year are taxed at 12.5% without indexation. |
Debt-oriented index funds
For debt-oriented index funds that qualify as specified mutual funds and are acquired on or after 1 April 2023, capital gains are treated as Short-Term Capital Gains (STCG) irrespective of the holding period and are taxed according to the investor’s applicable income tax slab.
Tax on IDCW
If you opt for the Income Distribution cum Capital Withdrawal (IDCW) option, any IDCW received is taxable in the hands of the investor as per the applicable tax provisions, and tax may be deducted at source (TDS) where applicable.
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An index fund may be a good investment for investors seeking a low-cost, diversified and passive way to participate in market-linked growth. It can be suitable for long-term financial goals, but returns are subject to market performance and are not guaranteed.
The best index fund depends on your financial goals, investment horizon and risk appetite. When comparing index funds, consider factors such as the benchmark index, expense ratio, tracking error, fund size and how closely the fund replicates its underlying index.
Yes, index funds carry market risk because they track the performance of a market index. Although they are diversified, their value can rise or fall depending on market conditions, so investors should invest according to their risk tolerance.
Yes, you can lose money in an index fund if the underlying market index declines. Like all market-linked investments, index funds carry investment risk and their value may fluctuate over the short and long term.
No, index funds do not guarantee returns. Their performance depends on the underlying benchmark index and market conditions, so returns can vary and investors may experience gains or losses.
Index fund returns generally reflect the performance of the benchmark index they track, subject to tracking error. Since market performance varies over time, actual returns are not guaranteed and may differ from historical returns.
Past performance may or may not be sustained in the future.
Both index funds and Exchange Traded Funds (ETFs) track a benchmark index, but ETFs are traded on stock exchanges throughout the day, while index mutual funds are purchased and redeemed at the applicable end-of-day Net Asset Value (NAV).
Index funds do not perform uniformly across all market conditions. Their performance generally reflects that of the underlying index, so they may rise during periods of market growth and decline during downturns.
Index funds aim to match the market rather than outperform it, so they may underperform actively managed funds during certain market phases. They are also exposed to market risk and their returns depend on the performance of the underlying index.
Some index funds offer an Income Distribution cum Capital Withdrawal (IDCW) option, while others offer a Growth option. IDCW payouts are not guaranteed and depend on the scheme’s distribution policy and applicable regulations.
The choice depends on your investment objectives, risk tolerance and investing experience. Individual stocks require research and active monitoring, while index funds offer diversified market exposure through a single investment.
Need help planning your investments?
Our Investment Philosophy reflects what we, as an organisation, believe will generate a good return on equity investment for our investors in the long term. It dictates our goals and guides decision making.
Alpha (a) is a term used in investing to describe an investment strategy’s ability to beat the market.
Alpha is thus also often referred to as excess return or the abnormal rate of return in relation to a benchmark, when adjusted for risk. Essentially, it means doing better than the crowd without taking disproportionate risk.
Collecting superior information
Analysts and portfolio managers strive to collect superior information about the business and the management of the company. They try to generate superior earnings forecast and the balance strength of the company and the industry, thereby trying to 'beat the market' on information edge. This is an important source of alpha for an investor. However, over the years, retaining the information edge has become more difficult and expensive. With a whole lot of investors trying to collect superior information, how can an investor be sure to continuously have accurate and material information about the companies, ahead of others, all the time?
Processing information better
Even if you don't have material information earlier than the crowd, you can still generate better outcomes if you are able to process this information better. Investors develop models and algorithms with enhanced predictive powers to forecast the next move. Fund managers who invest based on some pure formal analytical models are quantitative managers. Here, the goal is to try and beat other investors based on the sophistication of procedures or analytics. The analytical edge can be quite useful until it gets copied by many, and then it may stop generating superior returns.
Exploiting behavioural biases
As the name suggests, this edge is achieved by superior behaviour in reacting to the inputs available to maximise alpha. Modern finance assumes people behave with extreme rationality. However, researchers in behavioural finance have shown that this is not true. Moreover, these deviations from rationality are often systematic. Behavioural managers try to exploit situations where securities are mispriced by the market because of behavioural factors. At Bajaj Finserv AMC, we endeavour to combine the best of these edges.
