5 Best Index Mutual Funds That Delivered Over 30% Annual Returns

Index mutual funds are often seen as safe and conservative investment options. They are designed to mirror the performance of a specific market index and typically offer steady returns over the long term. However, recent performance data reveals a surprising trend. Some index funds, especially those tracking smallcap and midcap indices, have delivered exceptional growth in the past three years, even outperforming many actively managed schemes.

In this article, we explore the top five index mutual funds that have generated over 30% compounded annual growth rate (CAGR) in the last three years, turning passive investing into a rewarding opportunity.

What Are Index Mutual Funds?

Index mutual funds are passively managed investment vehicles. Instead of relying on fund managers to make stock-picking decisions, these funds invest in the same securities and proportions as their benchmark index. For example, a fund replicating the Nifty 50 will hold the same 50 stocks in the same weightage.

The major advantages of index funds are low expense ratios, transparency, and predictable performance in line with the market. With SEBI promoting passive investment strategies in India, these funds have become increasingly popular with investors who prefer simple, low-cost options for long-term wealth creation.

Why Focus on Smallcap and Midcap Index Funds?

While largecap indices such as Nifty 50 or Sensex tend to provide stability, smallcap and midcap indices often outperform in bullish phases of the market. These companies usually represent high-growth potential, which results in superior returns when the economy is in expansion mode.

The funds highlighted here fall under smallcap and midcap index categories, which explains their strong performance in the last three years. However, this comes with higher risk and volatility compared to largecap-oriented funds.

How We Shortlisted These Funds

To arrive at this list, only index funds were considered, excluding actively managed schemes. The selection was based purely on three-year CAGR performance. Funds with an annualized return of more than 30% over the last three years were chosen. This ensures that the funds highlighted have shown consistent and exceptional performance during this period.

Top 5 Index Mutual Funds with Over 30% CAGR in 3 Years

Here are the funds that made it to the list:

1. Aditya Birla Sun Life Nifty Smallcap 50 Index Fund
2. Axis Nifty Smallcap 50 Index Fund
3. Axis Nifty Midcap 50 Index Fund
4. Motilal Oswal Nifty Midcap 150 Index Fund
5. Aditya Birla Sun Life Nifty Midcap 150 Index Fund

Aditya Birla Sun Life Nifty Smallcap 50 Index Fund

This fund aims to replicate the performance of the Nifty Smallcap 50 Index. Over the last three years, it has generated a CAGR of 32%, with ₹1 lakh growing to approximately ₹2.26 lakhs.

Investors who want exposure to high-potential smallcap companies may find this fund appealing. However, the risks include sharp volatility and market cycles that affect smallcap stocks more severely than largecaps.

Axis Nifty Smallcap 50 Index Fund

Another fund that closely mirrors the Nifty Smallcap 50 Index, the Axis version has also delivered a three-year CAGR of 32%. The returns are nearly identical to the Aditya Birla fund, as both track the same index.

This scheme is suitable for aggressive investors who can tolerate volatility and wish to capture long-term smallcap growth. It is not recommended for conservative investors or those with short investment horizons.

Axis Nifty Midcap 50 Index Fund

The Axis Nifty Midcap 50 Index Fund invests in the companies that are part of the Nifty Midcap 50 Index. It has posted a 31% CAGR in the last three years, turning ₹1 lakh into nearly ₹2.2 lakhs.

Midcap companies often balance growth potential with relative stability compared to smallcaps. This makes the fund suitable for investors who want high growth without the extreme risk levels of smallcap funds.

Motilal Oswal Nifty Midcap 150 Index Fund

This scheme replicates the broader Nifty Midcap 150 Index. Over the last three years, it has delivered a CAGR of 30%, with ₹1 lakh growing to about ₹2.17 lakhs.

Its broader exposure to 150 midcap stocks provides diversification and reduces reliance on a smaller set of companies. However, this also increases the chances of tracking error compared to funds replicating narrower indices.

Aditya Birla Sun Life Nifty Midcap 150 Index Fund

Similar to the Motilal Oswal scheme, this fund tracks the Nifty Midcap 150 Index. It has also posted a 30% CAGR over three years. With a passive approach and low expense ratio, it offers investors a simple way to gain exposure to India’s midcap growth story.

Key Takeaways

The performance of these five index funds highlights an important lesson for investors. Passive investing is not always about modest, steady returns. When market cycles favor smallcap and midcap companies, index funds tracking these segments can deliver extraordinary gains.

However, investors should be mindful of concentration risks. Three of the five funds in this list are managed by Axis and Aditya Birla Sun Life, which means AMC exposure is not very diversified. Moreover, all of them focus on either midcap or smallcap indices, making them vulnerable to downturns in those segments.

Should You Invest in These Funds?

These funds are ideal for investors with a high-risk appetite and a long investment horizon. Smallcap and midcap stocks can be highly volatile, but they reward patience with strong growth in favorable market conditions. Conservative investors may want to limit their exposure or complement these funds with largecap and hybrid schemes for better stability.

As always, past performance is no guarantee of future returns. Investors should align their choices with financial goals, time horizon, and risk tolerance. Consulting a financial advisor before investing is recommended.

Conclusion

Index funds are no longer just about passive and conservative investing. The last three years have shown that smallcap and midcap index funds can outperform with aggressive returns, crossing the 30% CAGR mark. For investors willing to take calculated risks, these funds offer a compelling way to participate in India’s growth story while keeping costs low and strategies transparent.