- India’s passive investing surge sees investors favouring Index Funds.
- Thematic, sector-specific index funds gain traction, performing well.
- Healthcare, capital markets index funds led top performers last year.
India’s Mutual Fund industry has witnessed a sharp rise in passive investing over the past few years. More investors are choosing Index Funds for their relatively lower costs, transparency and ability to mirror the performance of a benchmark index instead of relying on active stock selection. Index funds aim to replicate the returns of an underlying index by investing in the same securities in similar proportions, making them a popular choice for long-term investors.
The increasing acceptance of passive investing has also led to the launch of several thematic and sector-specific index funds. Unlike broad market index funds that track indices such as the Nifty 50 or Sensex, these schemes follow specialised indices focused on sectors or investment themes such as healthcare, capital markets and financial services.
As a result, their performance largely depends on the underlying sector rather than the broader market. Also Read – Top ELSS Mutual Funds Based on 1-Year Returns Against this backdrop, healthcare and capital market-focused index funds emerged as the top performers over the past year. Here is a look at the five best-performing equity index funds based on one-year returns as of July 8, 2026.
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Top 5 Equity Index Funds
Fund Name One-Year Return (per cent)
Edelweiss MSCI India D&W Healthcare 45 18.77
Motilal Oswal Nifty Capital Market Index Fund 17.08
Tata Nifty Capital Markets Index Fund 16.76
Motilal Oswal Nifty Mid Small Financial Services Index Fund 16.09
ICICI Prudential Nifty Pharma Index Fund 14.18
What do investors need to take care of?
Investors should note that while index funds follow a passive investment strategy, thematic and sector-specific index funds remain exposed to concentration risk because they track a particular industry or theme. Their performance can therefore differ significantly from diversified equity index funds depending on sectoral trends.
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