Best Lowest Expense Ratio Mutual Funds in India 2025

Investing in mutual funds is a popular way for Indian investors to grow wealth over time. While many factors influence returns, one critical aspect often overlooked is the expense ratio. The expense ratio is the annual fee charged by fund houses to cover administrative, operational, and management costs. A lower expense ratio means more of the fund’s returns stay with the investor, making it a vital consideration when selecting a mutual fund.

Top Mutual Funds with Lowest Expense Ratios 

In 2025, many of the best mutual funds with the lowest expense ratios are mainly index funds that follow popular market benchmarks. Here are some notable funds from this category:

Kotak Nifty Next 50 Index Fund: This fund has an expense ratio of only 0.10%. It follows the Nifty Next 50 Index, giving access to companies that are ranked just below the Nifty 50. It has achieved a 3-year CAGR of nearly 16%, making it an affordable choice for large-cap investment. 

Axis Nifty Next 50 Index Fund: This fund has an expense ratio of 0.15% and a 3-year CAGR of about 15.8%. This fund tracks the Nifty Next 50 benchmark. It gives you a broad range of exposure to possible future large-cap companies.

Navi Nifty Next 50 Index Fund and DSP Nifty Next 50 Index Fund: These funds have slightly higher expense ratios of 0.16% and 0.28%, respectively, while delivering comparable returns around 15.8% CAGR over three years. 

In the mid-cap and small-cap segments, expense ratios range around 0.26% to 0.3%, with strong returns as well: 

Motilal Oswal Nifty Midcap 150 Index Fund and Axis Nifty Midcap 50 Index Fund both have expense ratios of 0.26%. The Axis fund has delivered a 3-year CAGR of 23.25%. 

Axis Nifty Smallcap 50 Index Fund and ICICI Prudential Nifty Smallcap 250 Index Fund have expense ratios between 0.27% and 0.3%, with compelling returns above 21%. 

HDFC Nifty Next 50 Index Fund, a large-cap fund, has an expense ratio of 0.3% and delivered close to 15.54% CAGR. 

Why Choose Low Expense Ratio Funds? 

Choosing mutual funds with low expense ratios can significantly enhance net returns over the long-term due to reduced cost drag. Expense ratios directly reduce the Net Asset Value (NAV) of the fund daily, meaning lower fees keep more of the fund’s gains in investors’ pockets. Particularly for passive index funds that mirror market benchmarks, lower expenses often translate into better compounding benefits over time.   

Conclusion  

For Indian investors who want to boost returns and cut costs, low expense ratio mutual funds are solid choices. This includes index funds that track the Nifty Next 50, Midcap, and Smallcap indices. By choosing these funds, investors can reduce fees, take advantage of market growth, and build long-term wealth more effectively.