6 Best Low Cost Index Funds In India With Low Expense Ratios

Every percentage point you pay in fees is money that doesn't compound in your favor. When investing in low cost index funds India, the expense ratio directly eats into your returns, and over 20-30 years, even a 0.5% difference can cost you lakhs. Smart investors know this, which is why hunting for the lowest expense ratios has become essential.

But comparing funds across AMCs isn't exactly simple. You need to dig through fact sheets, check tracking errors, and verify that "low cost" claims actually hold up. At Invsify, our AI-powered advisory helps Indian investors cut through this noise and make conflict-free, data-backed decisions, no hidden commissions, no bias toward specific fund houses.

This article breaks down 6 of the best low cost index funds currently available in India. You'll find their expense ratios, AUM, tracking performance, and what makes each one worth considering for your portfolio.

1. Invsify

Invsify isn't an index fund itself, but it's the smart way to access the best low cost index funds India has to offer. As a SEBI Registered Investment Advisor, Invsify uses AI-powered insights to recommend the right index funds based on your risk profile, goals, and tax situation. You don't get locked into one fund house or pay hidden commissions that eat into your returns.

Index tracked and diversification

Invsify's AI scans multiple index funds across different AMCs to find options that track popular indices like Nifty 50, Sensex, Nifty Next 50, and sectoral indices. You get recommendations tailored to your portfolio needs, whether that means broad market exposure or targeted diversification. The platform doesn't push proprietary products because it doesn't have any to sell.

Total cost: TER and loads

Your total cost depends on which funds Invsify recommends, but the advisory fee structure is transparent upfront. You avoid the 1-2% commissions traditional distributors charge annually, which Invsify's Hidden Fee Calculator shows can save you lakhs over time. The funds recommended are typically direct plans with expense ratios as low as 0.05% to 0.20%.

"Eliminating distributor commissions means more of your money stays invested and compounds over decades."

Tracking error and liquidity

Invsify monitors tracking error data across recommended funds and alerts you if a fund starts underperforming its benchmark consistently. You can access real-time portfolio tracking through the platform, and the AI flags liquidity concerns if AUM drops or redemption issues arise. This active oversight isn't something you get from self-directed investing.

Performance check: returns and drawdowns

The platform provides personalized weekly insights on how your selected index funds are performing against benchmarks. You see annualized returns, rolling returns, and drawdown analysis in an easy-to-digest format. The AI also suggests rebalancing when necessary based on your wealth wellness score.

Practicalities: taxation and how to invest

Invsify handles the KYC process seamlessly and connects you with trusted partners to execute investments. You get tax-saving insights specific to equity mutual funds (LTCG above ₹1.25 lakh taxed at 12.5%). The Conversational RM AI answers questions 24/7 in multiple languages, so you never feel stuck during tax season or portfolio reviews.

2. Tata Nifty 50 Index Fund direct plan

Tata Nifty 50 Index Fund stands out among low cost index funds India offers because of its rock-bottom expense ratio of just 0.05%. Launched in 2013, this fund has built a solid track record with an AUM exceeding ₹5,000 crore, making it one of the most cost-efficient ways to get exposure to India's top 50 companies.

2. Tata Nifty 50 Index Fund direct plan

Index tracked and diversification

This fund tracks the Nifty 50 Index, giving you exposure to 50 large-cap stocks across sectors like finance, IT, energy, and consumer goods. You get instant diversification without stock-picking risk, as the fund replicates the index composition exactly.

Total cost: TER and loads

The direct plan charges only 0.05% TER, one of the lowest in India. There are no entry or exit loads, so your entire investment goes to work immediately. Over 20 years, this tiny expense ratio saves you significantly compared to regular plans charging 1% or more.

Tracking error and liquidity

The fund maintains a tight tracking error of around 0.10%, meaning it closely mirrors the Nifty 50's performance. With daily liquidity and a large AUM base, you can redeem your units anytime without concerns about execution delays.

Performance check: returns and drawdowns

The fund has delivered 10-12% annualized returns over the past five years, matching the Nifty 50 benchmark almost perfectly. Maximum drawdowns during market corrections align with the index, as expected from passive investing.

"Low tracking error means you actually get the market returns you're paying for."

Practicalities: taxation and how to invest

You can invest through AMC websites, mutual fund platforms, or your broker. LTCG above ₹1.25 lakh is taxed at 12.5%, while STCG attracts 20% tax if sold within a year.

3. Navi Nifty 50 Index Fund direct plan

Navi Nifty 50 Index Fund has disrupted the space with an expense ratio of just 0.06%, making it one of the cheapest index funds available to Indian investors. Launched by Sachin Bansal's fintech venture, this fund has quickly gained traction with an AUM of over ₹2,500 crore since its 2020 launch, proving that newer AMCs can compete on cost efficiency.

Index tracked and diversification

This fund tracks the Nifty 50 Index, giving you exposure to India's 50 largest and most liquid companies. You get automatic diversification across sectors like banking, IT, and energy without needing to pick individual stocks yourself.

Total cost: TER and loads

The direct plan charges 0.06% TER, positioning it among low cost index funds India currently offers. You pay no entry or exit loads, which means every rupee you invest starts working immediately without deductions eating into your capital.

Tracking error and liquidity

The fund maintains a tracking error under 0.15%, closely following the Nifty 50's movements. With daily NAV updates and strong liquidity, you can redeem units without delays, though the relatively smaller AUM compared to older funds is worth noting.

Performance check: returns and drawdowns

Since inception, the fund has delivered returns matching the Nifty 50 benchmark within the tracking error margin. Drawdowns during market corrections mirror the index, as expected from passive replication.

"A 0.06% expense ratio means 99.94% of your returns stay with you."

Practicalities: taxation and how to invest

You can invest through Navi's app, AMC portals, or mutual fund platforms. Equity taxation applies: LTCG above ₹1.25 lakh taxed at 12.5%, STCG at 20% if held under one year.

4. UTI Nifty 50 Index Fund direct plan

UTI Nifty 50 Index Fund brings decades of fund management experience to the passive investing space, with a direct plan expense ratio of just 0.06%. As India's oldest mutual fund house, UTI has managed this fund since 2000, building an AUM of over ₹10,000 crore and establishing itself as a reliable option among low cost index funds India currently offers.

Index tracked and diversification

This fund tracks the Nifty 50 Index, giving you exposure to 50 blue-chip stocks that represent roughly 65% of India's equity market capitalization. You get automatic rebalancing as the index composition changes, with heavy weights in financial services, IT, and consumer goods.

Total cost: TER and loads

The direct plan charges 0.06% TER, placing it among the cheapest options available. You face no entry or exit loads, which means your full investment amount works for you from day one without any deductions cutting into your capital.

Tracking error and liquidity

The fund maintains a tracking error below 0.12%, closely mirroring the Nifty 50's performance. With strong daily liquidity backed by a large AUM base, you can redeem units anytime without execution concerns.

Performance check: returns and drawdowns

The fund has delivered returns matching the Nifty 50 benchmark over various time periods, typically within the tracking error margin. Drawdowns align with the index during market corrections, as expected from passive replication.

"UTI's long operational history provides confidence in consistent tracking performance."

Practicalities: taxation and how to invest

You can invest through UTI's website, mutual fund platforms, or brokers. Standard equity taxation applies: LTCG above ₹1.25 lakh taxed at 12.5%, STCG at 20% if sold within one year.

5. ICICI Prudential S&P BSE Sensex Index Fund

ICICI Prudential S&P BSE Sensex Index Fund offers exposure to India's oldest stock index with a direct plan expense ratio of 0.09%. Launched in 2013, this fund has accumulated an AUM exceeding ₹2,000 crore, backed by one of India's largest AMCs. You get access to 30 well-established companies that have defined India's equity markets for decades.

5. ICICI Prudential S&P BSE Sensex Index Fund

Index tracked and diversification

This fund tracks the S&P BSE Sensex, giving you exposure to 30 of India's most established large-cap stocks. You get diversification across key sectors like banking, IT, energy, and FMCG, with companies like Reliance, TCS, and HDFC Bank forming the core holdings.

Total cost: TER and loads

The direct plan charges 0.09% TER, positioning it competitively among low cost index funds India has available. You pay no entry or exit loads, ensuring your entire investment works for you without upfront deductions eating into your capital.

Tracking error and liquidity

The fund maintains a tracking error under 0.15%, closely following the Sensex movements. With daily liquidity and ICICI's robust infrastructure, you can redeem units smoothly without execution delays or price slippage concerns.

Performance check: returns and drawdowns

The fund has delivered returns matching the Sensex benchmark within acceptable tracking margins. Drawdowns during corrections mirror the index performance, as expected from passive strategies.

"The Sensex's 30-stock composition means higher concentration risk than Nifty 50."

Practicalities: taxation and how to invest

You can invest through ICICI Direct, AMC platforms, or mutual fund aggregators. Standard equity taxation applies: LTCG above ₹1.25 lakh taxed at 12.5%, STCG at 20% if held under one year.

6. HDFC Index Fund S&P BSE Sensex Plan

HDFC Index Fund S&P BSE Sensex Plan brings one of India's most trusted AMC brands to the passive investing space with a direct plan expense ratio of 0.20%. Launched in 2002, this fund has built an AUM of over ₹1,000 crore, offering stability and consistent tracking for investors seeking Sensex exposure.

Index tracked and diversification

This fund tracks the S&P BSE Sensex, giving you exposure to 30 blue-chip companies that form the backbone of India's equity markets. You get concentrated exposure to established names across banking, IT, energy, and consumer sectors, though this means less diversification than Nifty 50 funds.

Total cost: TER and loads

The direct plan charges 0.20% TER, which is higher than some newer low cost index funds India offers but still reasonable for HDFC's brand reliability. You face no entry or exit loads, so your full investment amount compounds without upfront deductions.

Tracking error and liquidity

The fund maintains a tracking error around 0.20%, slightly higher than competitors but within acceptable limits. With daily liquidity and HDFC's strong operational track record, you can redeem units without concerns about execution quality or delays.

Performance check: returns and drawdowns

The fund has delivered returns closely matching the Sensex benchmark over multiple time horizons. Drawdowns during market corrections align with index movements, providing the passive exposure you expect from this investment vehicle.

"HDFC's established operations provide confidence in long-term tracking consistency."

Practicalities: taxation and how to invest

You can invest through HDFC's platform, mutual fund aggregators, or brokers. Standard equity taxation applies: LTCG above ₹1.25 lakh taxed at 12.5%, STCG at 20% if sold within one year.

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Next steps

Choosing among these low cost index funds India offers comes down to three factors: the expense ratio, the index tracked (Nifty 50 vs Sensex), and the AMC's operational reliability. You've seen options ranging from 0.05% to 0.20% TER, all of which beat actively managed funds on cost efficiency over decades of compounding.

Your next move depends on whether you want to self-manage these investments or get AI-powered guidance that prevents costly mistakes. Picking the wrong fund for your risk profile, mistiming your entry, or ignoring tax optimization can cost you more than any expense ratio difference ever will. Invsify eliminates these risks by providing conflict-free recommendations tailored specifically to your wealth goals. Sign up with Invsify to get personalized fund suggestions based on your needs, with 24/7 AI advisory support that ensures you stay on track without paying distributor commissions that silently eat into your compounding returns year after year.