Index Funds are a type of mutual fund that mimic or imitate a stock market index like NIFTY 50, BSE Sensex or any other index.

Index Fund works by investing in the same securities that forms the index. The NIFTY index is made of 50 stocks so the NIFTY index fund will have the same 50 stocks in the same %

Index Funds are designed to track the index so the returns of the fund tend to mimic the index.

Whenever there is a revision in the index the fund also changes its portfolio accordingly to match the index. So the fund manager does not take any independent buy sell decision.

Various factors like cash in the portfolio or changes in index leads to Tracking Error. It is nothing but the difference in the returns of the index fund vis a vis returns of the index.

Equity Index Funds are taxed like Equity Mutual funds or Shares. 15% Short Term Capital Gain Tax and 10% Long Term Capital Gain Tax

Some Index Funds available are based on – NIFTY 50 Sensex NIFTY Bank NIFTY Next 50 NIFTY 100 NIFTY Large Midcap 250 NIFTY Smallcap 250 NIFTY 500


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