How do I Choose the Best India Index Fund?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 22 August 2019
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Choosing the best India index fund means fine-tuning a decision to invest in this national market through a broad and diversified fund option. Investors use details like cost, access, strategy, and desired gains to evaluate the underlying equities of an India index fund to make the best purchase decisions. Using this kind of fund is a popular way to break into plays on emerging markets.

One of the first things investors might look out for when choosing optimized India index funds is the cost and fees associated with a particular fund. Some funds might be traded with commissions just like a single stock, but many index funds will have costs in the form of an “expense ratio” that shows how much it will cost the investor to get involved. Some other funds might have restrictions such as minimum contributions. According to some of the traders who are looking at comparative costs of global index funds, India index funds have some exceptionally high expense ratios, making other alternatives more attractive to certain investors who are looking at lower cost funds.


Another big factor in selecting India index funds is the idea of active versus passive funds, and how much exposure a single regional index fund has to volatility. Although India is an emerging market, a country that many experts predict will have vibrant growth and expansion in coming years, some have also refer to the “choppy “ or “uneven” Indian markets as places where volatility can lead to big losses, as well as big gains. Index funds in general tend to be relatively stable, since they rely on passive index tracking rather than active stock picking by a financial manager. It’s still a good idea to look at all of the items in the index fund, and see how it can handle increased volatility.

Beyond these considerations, investors often want to pick the India index fund options that include exposure to some of their favorite sectors or stocks. For example, some India index funds might include Indian auto stocks that are prized by a set of investors who are looking at initiatives like low cost auto production in India. Others who want to choose between “small-cap” India index funds that highlight local, smaller companies, and “large-cap” funds that include more established Indian companies as well as multinationals.

Yet another big factor in choosing an India index fund is access. This includes the idea of whether the Indian stocks in the fund are traded through foreign exchanges, as well as how the individual can access the fund from his or her brokerage account. Some index funds are set up as exchange traded funds or ETFs, which can allow better tracking and trading through a brokerage account with a global reach.


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You might also want to consider the class of shares you are buying when you are trying to select the best India index fund. Some share classes generate a fee when they are sold or traded and others have an upfront fee that is paid when they are purchased. This can be important depending on how many shares you buy and when you plan to sell them.

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