Exchange Traded Funds (ETFs) have transformed the way individuals build wealth, offering a simple, low-cost path to diversified investing. In 2025, the popularity of ETFs is only accelerating, as more investors look beyond traditional mutual funds to embrace strategies that combine flexibility, transparency, and the power of index-based investing.
Whether you’re a beginner exploring your first fund or a seasoned investor searching for the best ETFs to invest in 2025, the choices can feel overwhelming. From top performing ETFs riding the wave of technology and clean energy to low-cost ETFs to buy for stable, long-term growth, there’s an ETF for nearly every investment objective.
This guide will help you navigate the landscape of ETFs in 2025. You’ll discover the most promising funds across sectors and regions, learn how to choose the right ones for your goals, and gain practical tips to invest with confidence. Let’s dive in and explore how ETFs can make this year your strongest bet in the market.
Suggested Read: ETFs and Mutual Funds: 5 Key Differences to Make the Best Choice
What are ETFs and Why are They Popular?
Exchange Traded Funds, commonly known as ETFs, are investment funds that hold a basket of securities like stocks, bonds, or commodities and trade on stock exchanges just like individual shares. Over the past decade, ETFs have become one of the most preferred tools for investors who want diversified exposure without the complexity or high costs of actively managed funds.
One of the main reasons so many people are searching for the best ETFs to invest in 2025 is their unique combination of benefits:
Low Cost: Most ETFs have significantly lower expense ratios compared to mutual funds, making them an attractive choice for cost-conscious investors looking for low-cost ETFs to buy.
Diversification: A single ETF can give you access to dozens or even hundreds of companies, spreading your risk across sectors, countries, and asset classes.
Liquidity and Transparency: Since ETFs trade throughout the day, you can buy or sell them anytime the market is open. Additionally, most ETFs disclose their holdings daily, helping investors clearly understand what they own.
Flexibility: Whether you prefer broad market exposure or want to target top performing ETFs on a specific theme like technology, clean energy, or emerging markets, there are countless options to match your strategy.
While ETFs have many advantages, they also carry risks such as market volatility, sector concentration, and tracking error (when an ETF’s returns deviate slightly from its benchmark index). That’s why it’s crucial to do your research before you invest.
Suggested Read: Gold ETFs vs. Gold Mutual Funds: Top pick for Investors in 2025
Top Performing ETFs in India in 2025
Top Performing ETFs in India 1-Year Returns
| ETF Name | 1-Year Return (%) | Expense Ratio (%) | AUM (₹ Cr.) |
| Mirae NYSE FANG+ ETF | 34.95 | 0.65 | 2,876.11 |
| MO Midcap 100 ETF | 7.64 | 0.23 | 644.2 |
| Kotak Nifty Midcap 50 ETF | 7.51 | 0.05 | 68.13 |
| Mirae Nifty Midcap 150 ETF | 5.98 | 0.05 | 1,072.66 |
| Nippon Nifty Midcap 150 ETF | 5.78 | 0.21 | 2,223.94 |
| Bharat 22 ETF | -0.13 | 0.07 | 17,474.74 |
| CPSE ETF | -0.25 | 0.07 | 36,795.40 |
| Nippon Nifty PSU ETF | -2.14 | 0.49 | 2,877.17 |
| Kotak Nifty PSU ETF | -2.14 | 0.49 | 1,522.73 |
Exchange Traded Funds (ETFs) have transformed the way individuals build wealth, offering a simple, low-cost path to diversified investing. In 2025, the popularity of ETFs is only accelerating, as more investors look beyond traditional mutual funds to embrace strategies that combine flexibility, transparency, and the power of index-based investing.
Whether you’re a beginner exploring your first fund or a seasoned investor searching for the best ETFs to invest in 2025, the choices can feel overwhelming. From top performing ETFs riding the wave of technology and clean energy to low-cost ETFs to buy for stable, long-term growth, there’s an ETF for nearly every investment objective.
This guide will help you navigate the landscape of ETFs in 2025. You’ll discover the most promising funds across sectors and regions, learn how to choose the right ones for your goals, and gain practical tips to invest with confidence. Let’s dive in and explore how ETFs can make this year your strongest bet in the market.
Suggested Read: Top 8 Gold ETFs in India: A Comprehensive Overview
What are ETFs and Why are They Popular?
Exchange Traded Funds, commonly known as ETFs, are investment funds that hold a basket of securities like stocks, bonds, or commodities and trade on stock exchanges just like individual shares. Over the past decade, ETFs have become one of the most preferred tools for investors who want diversified exposure without the complexity or high costs of actively managed funds.
One of the main reasons so many people are searching for the best ETFs to invest in 2025 is their unique combination of benefits:
Low Cost: Most ETFs have significantly lower expense ratios compared to mutual funds, making them an attractive choice for cost-conscious investors looking for low-cost ETFs to buy.
Diversification: A single ETF can give you access to dozens or even hundreds of companies, spreading your risk across sectors, countries, and asset classes.
Liquidity and Transparency: Since ETFs trade throughout the day, you can buy or sell them anytime the market is open. Additionally, most ETFs disclose their holdings daily, helping investors clearly understand what they own.
Flexibility: Whether you prefer broad market exposure or want to target top performing ETFs on a specific theme like technology, clean energy, or emerging markets, there are countless options to match your strategy.
While ETFs have many advantages, they also carry risks such as market volatility, sector concentration, and tracking error (when an ETF’s returns deviate slightly from its benchmark index). That’s why it’s crucial to do your research before you invest.
Top Performing ETFs in India in 2025
Top Performing ETFs in India (1-Year Returns)
| ETF Name | 1-Year Return (%) | Expense Ratio (%) | AUM (₹ Cr.) |
| Mirae NYSE FANG+ ETF | 34.95 | 0.65 | 2,876.11 |
| MO Midcap 100 ETF | 7.64 | 0.23 | 644.2 |
| Kotak Nifty Midcap 50 ETF | 7.51 | 0.05 | 68.13 |
| Mirae Nifty Midcap 150 ETF | 5.98 | 0.05 | 1,072.66 |
| Nippon Nifty Midcap 150 ETF | 5.78 | 0.21 | 2,223.94 |
| Bharat 22 ETF | -0.13 | 0.07 | 17,474.74 |
| CPSE ETF | -0.25 | 0.07 | 36,795.40 |
| Nippon Nifty PSU ETF | -2.14 | 0.49 | 2,877.17 |
| Kotak Nifty PSU ETF | -2.14 | 0.49 | 1,522.73 |
Data available is updated as of 01.07.25.
Top Performing ETFs in India 3-Year Returns
| ETF Name | 3-Year Return (%) | Expense Ratio (%) | AUM (₹ Cr.) |
| Mirae NYSE FANG+ ETF | 47.91 | 0.65 | 2,876.11 |
| Nippon India Nifty PSU ETF | 43.77 | 0.49 | 2,877.17 |
| Kotak Nifty PSU ETF | 43.77 | 0.49 | 1,522.73 |
| CPSE ETF | 41.8 | 0.07 | 36,795.40 |
| Bharat 22 ETF | 34.13 | 0.07 | 17,474.74 |
| Kotak Nifty Midcap 50 ETF | 32.61 | 0.05 | 68.13 |
| MO Midcap 100 ETF | 31.75 | 0.23 | 644.2 |
| Mirae Nifty Midcap 150 ETF | 30.47 | 0.05 | 1,072.66 |
| Nippon Nifty Midcap 150 ETF | 30.33 | 0.21 | 2,223.94 |
Data available is updated as of 01.07.25.
Top Performing ETFs in India 5-Year Returns
| ETF Name | 5-Year Return (%) | Expense Ratio (%) | AUM (₹ Cr.) |
| CPSE ETF | 39.74 | 0.07 | 36,795.40 |
| Nippon India Nifty PSU ETF | 38.64 | 0.49 | 2,877.17 |
| Kotak Nifty PSU ETF | 38.58 | 0.49 | 1,522.73 |
| Bharat 22 ETF | 34.37 | 0.07 | 17,474.74 |
| MO Midcap 100 ETF | 32.88 | 0.23 | 644.2 |
| Nippon Nifty Midcap 150 ETF | 31.95 | 0.21 | 2,223.94 |
| Nippon Infra BeES | 25.35 | 1.04 | 166.4 |
| UTI BSE Sensex Next 50 ETF | 26.68 | – | 26.1 |
| MO NASDAQ 100 ETF | 20.27 | 0.58 | 8,996.41 |
Data available is updated as of 01.07.25.
Key ETF Trends in India for 2025
India’s ETF market has evolved rapidly over the past few years. In 2025, several trends are defining this growth and creating new opportunities for investors.
Below are the most important trends shaping ETF investing in India:
Sector-Specific and Thematic ETFs Gaining Popularity
Indian investors are increasingly drawn to ETFs targeting fast-growing sectors like technology, healthcare, and renewable energy. These thematic funds allow you to invest in emerging trends driving the Indian economy while maintaining the diversification benefits of an ETF.
For example, renewable energy ETFs have seen significant inflows as investors align their portfolios with India’s clean energy transition.
Rise of Smart Beta and Factor-Based ETFs
Smart Beta ETFs are becoming a prominent feature in India’s ETF landscape. Unlike traditional index funds, these ETFs use rules-based strategies to target factors such as value, momentum, or low volatility.
This approach offers investors a middle ground between passive and active investing, with the potential for enhanced risk-adjusted returns. As more fund houses launch Smart Beta products, these ETFs are expected to attract both retail and institutional capital.
Growing Adoption of ESG ETFs
Environmental, Social, and Governance (ESG) investing, though still early-stage in India, is gaining traction. ESG ETFs screen companies based on sustainability and ethical practices, appealing to investors who want their money to reflect their values.
This trend is expected to accelerate as regulations and awareness evolve.
Active ETFs Entering the Market
Traditionally, ETFs were synonymous with passive strategies, but active ETFs are now emerging in India. These funds use active management to try to outperform benchmarks while retaining the trading flexibility of ETFs.
For investors seeking professional management without the high costs of mutual funds, active ETFs can offer an attractive alternative.
Fractional Investing Enhancing Accessibility
Many platforms have popularized fractional investing in ETFs, allowing investors to buy small quantities without needing large sums of capital. This innovation is democratizing access and enabling more Indians to diversify their portfolios affordably.
Digital Platforms and Technology Driving Growth
The rise of online brokers, robo-advisors, and mobile apps is making ETFs more accessible than ever. User-friendly platforms are educating new investors, simplifying transactions, and lowering entry barriers.
According to Ernst & Young’s global projections, total ETF assets under management worldwide could reach US$25 trillion by 2030, underscoring the vast scale and future potential of the ETF market.
Potential Role of AI and Machine Learning
While still in its early stages domestically, AI-powered ETF strategies could soon play a bigger role in India. Advanced analytics can help fund managers identify opportunities, optimize portfolios, and adapt to market conditions in real time. This will likely be a major area of innovation over the next decade.
How to Choose the Right ETF
With so many options available, from low-cost ETFs to buy tracking the Nifty 50 to top performing ETFs targeting sectors like technology or gold, selecting the right fund can feel overwhelming. The key is to match your investment choices to your objectives, risk tolerance, and time horizon.
Here are some important factors to consider before investing in any ETF:
Investment Objective
Start by clarifying what you want to achieve:
- Wealth Creation: Broad market ETFs like Nifty 50 or Sensex ETFs can be suitable for long-term growth.
- Diversification: Consider sector or thematic ETFs to spread your exposure across different themes.
- Stability and Income: Debt ETFs or Bharat Bond ETFs can help balance your portfolio.
- Hedge Against Inflation: Gold ETFs are popular in India for wealth protection.
Expense Ratio
The expense ratio is the annual fee charged by the fund. Lower costs mean more of your money stays invested.
- Popular index ETFs typically have an expense ratio below 0.10%.
- Thematic and international ETFs can have higher costs (0.30–0.80%).
Before investing, compare the expense ratio of similar funds.
Liquidity and Trading Volume
Liquidity is essential to ensure you can buy or sell units without significant price impact.
- Nifty 50, Sensex, and Gold ETFs have high daily volumes.
- Niche sector ETFs may have lower liquidity, leading to wider bid-ask spreads.
Look for ETFs with consistent trading activity.
Tracking Error
Tracking error measures how closely an ETF follows its benchmark index. Lower tracking error is generally better.
- Well-established ETFs often have tracking errors below 0.5% annually.
- Newer or less liquid funds can show higher deviation.
Always review the tracking record in the fund’s factsheet.
Volatility
Understand how much the ETF’s price can fluctuate.
- Equity and thematic ETFs can be more volatile.
- Debt and liquid ETFs tend to show lower price swings.
Assess your risk tolerance before choosing higher-volatility products.
Fund Size and History
A larger fund size (Assets Under Management) and a longer performance track record often indicate stability.
- Many top performing ETFs have an AUM of over ₹1,000 crore and more than 5 years of history.
- For newer funds, consider waiting to see how they perform across market cycles.
By carefully evaluating these factors, you can shortlist the best ETFs to invest in 2025 that align with your financial goals, whether you are building a core portfolio, adding sector exposure, or seeking diversification.
Tips for ETF Investors in 2025
Whether you’re new to ETFs or already hold them in your portfolio, staying informed and disciplined is essential. The Indian ETF market is evolving rapidly, and investors have access to a broader range of funds, from low-cost ETFs to buy for core allocation to top performing ETFs targeting emerging sectors.
Here are some tips to help you invest wisely this year:
Avoid Chasing Short-Term Performance
It can be tempting to pick ETFs based only on recent returns. Remember that top performing ETFs in one year may underperform the next. Always assess:
- The long-term track record
- Consistency across different market conditions
- The fundamentals of the underlying index or sector
Keep Costs in Check
Expense ratios directly reduce your returns over time.
- For core holdings, consider low-cost ETFs with minimal fees (often under 0.10%).
- If you choose thematic or sector ETFs, ensure the higher costs are justified by clear objectives.
Diversify Across Asset Classes
Don’t put all your investments into a single ETF or theme.
- Use broad index ETFs for core equity exposure.
- Add debt or gold ETFs to help manage volatility.
- Consider international ETFs if you want currency and geographical diversification.
Monitor Liquidity
Higher liquidity generally means:
- Narrower bid-ask spreads
- Easier execution of large trades
- Lower impact costs
Check daily trading volumes, especially if you plan to invest significant amounts.
Understand Tax Implications
ETFs are taxed based on the asset class:
- Equity ETFs: Similar to equity taxation (STCG and LTCG).
- Gold ETFs: Treated as non-equity (debt) taxation.
- Debt ETFs: Taxed like debt mutual funds.
Always consult a tax advisor to understand the impact on your personal situation.
Use a Long-Term Approach
ETFs work best when held for longer periods, allowing the power of compounding to work.
- Avoid frequent buying and selling based on short-term market movements.
- Review your holdings annually to ensure they still align with your goals.
Stay Informed About New Launches
The Indian ETF landscape is dynamic, with new products emerging in areas like:
- ESG-focused strategies
- Factor-based Smart Beta funds
- Sectoral and international exposure
Stay updated so you can evaluate whether new options fit your portfolio.
Common Mistakes to Avoid
Even though ETFs are simpler than many other investments, there are common pitfalls that can impact your returns. Here are some mistakes to watch out for when exploring the best ETFs to invest in 2025 or adding new funds to your portfolio:
Investing Without Understanding the Underlying Index
Many investors buy ETFs just because they are popular or trending.
Before investing, ask yourself:
- What does this ETF actually track?
- Does the underlying index align with my goals?
- Is the theme sustainable over the long term?
Ignoring the Expense Ratio
While most ETFs are low cost, some thematic or international ETFs can have much higher expenses.
- For core allocations, prioritise low-cost ETFs to buy.
- Always compare the expense ratio with peers.
Even a small difference in costs compounds over the years.
Overconcentration in a Single Sector or Theme
It’s easy to get carried away with the performance of top performing ETFs in trending sectors like technology or banking. Overexposure increases risk if that sector underperforms.
- Use sector ETFs as part of a diversified strategy, not your entire portfolio.
Neglecting Liquidity and Bid-Ask Spread
Some ETFs have low daily volumes, which can lead to:
- Wider bid-ask spreads
- Difficulty exiting large positions
Always check liquidity before investing, especially in niche ETFs.
Trying to Time the Market
Buying and selling ETFs frequently based on short-term predictions often results in higher costs and emotional decisions.
- ETFs are best suited for disciplined, long-term investing.
- Have a plan and stick to it.
Ignoring Tax Treatment
Different ETFs are taxed differently:
- Equity ETFs have equity taxation.
- Gold and debt ETFs have non-equity taxation rules. Understand this before making allocation decisions to avoid surprises later.
By avoiding these common mistakes, you can use ETFs more effectively to build a diversified, cost-efficient portfolio suited to your long-term goals.
Bottom Line
ETFs have become one of the most effective ways for Indian investors to build wealth with transparency, flexibility, and lower costs compared to traditional mutual funds. In 2025, the range of choices is wider than ever, from low-cost ETFs to buy that track broad indices like Nifty 50 and Sensex, to top performing ETFs targeting global technology, gold, and emerging sectors.
As you evaluate the best ETFs to invest in 2025, remember to:
- Define your investment goals and time horizon.
- Consider expense ratios, liquidity, and tracking errors.
- Diversify across asset classes to reduce risk.
- Stay disciplined and avoid chasing short-term trends.
Whether you are building a core long-term portfolio or adding exposure to specific themes, ETFs can help you participate in market growth in a way that suits your comfort level and objectives.
FAQs
What are ETFs and why are they popular among investors?
Exchange Traded Funds (ETFs) are investment funds that hold a basket of securities like stocks or bonds and trade on stock exchanges. They are popular because they combine diversification, cost-efficiency, and flexibility. Investors use ETFs to access different market segments or themes without picking individual stocks. Their low expense ratios and transparency make them an appealing option for both beginners and experienced investors seeking long-term growth or targeted exposure.
Are ETFs suitable for beginners in India?
Yes, ETFs can be suitable for beginners because they are relatively simple and offer instant diversification. By investing in an ETF, you gain exposure to multiple securities through a single transaction. However, it’s important to understand the ETF’s underlying index, associated risks, and costs. Beginners should start with a clear goal, learn about how ETFs work, and consider consulting a financial advisor to ensure the investment matches their risk tolerance.
What should I consider before investing in an ETF?
Before investing, review the ETF’s investment objective, expense ratio, liquidity, and tracking error. It’s also essential to understand the underlying index or sector and assess whether it aligns with your financial goals and time horizon. Look into the fund’s performance history and volatility. Comparing similar ETFs can help you make an informed decision. Remember, all investments carry risks, so thorough research and planning are important.
How are ETFs taxed in India?
ETFs in India are taxed based on the type of assets they hold. Equity ETFs are generally treated like stocks, where long-term gains are taxed at 10% above a threshold and short-term gains at 15%. Non-equity ETFs, such as gold or debt ETFs, are taxed differently, often with higher rates for short-term holdings. It’s advisable to consult a tax professional to understand how ETF taxation applies to your specific situation.
Can ETFs be used for long-term investing?
Yes, many investors use ETFs as part of a long-term investment strategy. ETFs can be held for several years to benefit from compounding and market growth. Their diversification and relatively low costs make them well-suited for building core portfolios aimed at wealth creation over time. However, it’s important to regularly review your investments to ensure they remain aligned with your goals and risk appetite.
