Index Funds: An Emerging Mutual Fund Investment Scheme

Abstract

Financial market is back bone of any economy. Innovation in financial instruments has given rise to mutual funds. Mutual funds are novel financial service which emerged in India during the year 1964. As mutual funds are professionally managed it is expected to give good return and also gives advantage of liquidity and diversification. Indian mutual fund industry has undergone a radical change and has grown by leaps and bounds in terms of products and asset under management. Right now Indian mutual industry is managing Rs. 16.5 Lakh Crore of funds. It has introduced many products such as income funds, equity funds, balanced funds, money market funds, fund of funds and many others. Out of these funds equity funds constitutes a major proportion. Equity funds are of many types such as sectoral funds, index funds, Equity Linked tax saving schemes, diversified funds etc. Out of these funds index funds is one of the recent origin which offers the primary advantage of earning the return equal to stock market. Index funds will follow a passive investment strategy where investment under these funds will replicate the movements of benchmark indices like Nifty, Sensex etc. Index funds are of wide range offered by many asset management companies. Identifying right schemes will benefit the investor by providing superior return. Thus in this study an attempt is made to analyse the performance of index mutual fund schemes listed in National Stock exchange. The study has taken 3 years data pertained to index mutual fund schemes to understand about its performance, risk etc. According to present study out of 13 mutual fund schemes 7 have returns higher than the nifty index. The study result based on three years data show the top three funds are HDFC Index Fund Nifty Plan, IDFC Nifty Fund Growth and UTI Nifty Index Fund – Growth. The bottom three funds are SBI Nifty Index, LIC Index Fund- Nifty- Growth, and IDBI Nifty Index Fund.