Only a small fraction of niche indices launched by stock exchanges are being used as benchmarks by asset management companies, according to analysis by Mint of exchange and Value Research data. Of the National Stock Exchange's 61 niche indices, 23 are used as benchmarks by mutual funds or tracked by passive funds, while the BSE has seven of its 26 niche indices used as benchmarks or followed by passive funds. Currently, 80 of the 108 BSE equity indices are tracked by passive funds or used as benchmarks.
Many niche indices remain untracked by investment products due to their specialized themes and high risk profiles. The Nifty Sugar and Ethanol index, launched in June, tracks the top 15 stocks of companies producing sugar or ethanol, while the Nifty Waves index, launched in May 2025, focuses on companies in films, television, digital media, music and gaming. Other untracked indices include the Nifty SME Emerge (tracking small and medium enterprises on NSE EMERGE platform) and conglomerate-specific indices like the Nifty India Corporate Group Index—Tata Group and Mahindra Group.
According to investment adviser Vivek SG from Wealth Crafts, many niche indices are highly cyclical or performance can change due to regulatory changes or events. Conglomerate-specific index funds may decline sharply if there is a corporate governance issue, making such funds suitable only for those who closely track such themes. As reported by Mint, many AMCs first identify niche themes through back-testing historical data before approaching exchanges to create custom indices.
Despite challenges, some niche indices have found success through strategic timing and market conditions. When UTI Mutual Fund launched its Nifty200 Momentum 30 Index Fund in 2021, it had assets of ₹805 crore but grew to ₹8,433 crore as of May as momentum as a factor gained popularity. According to NSE Indices Ltd, which manages over 419 indices under the Nifty brand, indices serve multiple purposes including portfolio construction, performance measurement, and research beyond just investment products.
Market experts note a lag factor between index launch and fund house adoption, with Srikanth Meenakshi from PrimeInvestor noting that just because there isn't a fund today doesn't mean there won't be one tomorrow. Mirae Asset Mutual Fund's Vaibhav Shah emphasizes that AMCs assess various factors before launching niche funds, including index investability, liquidity of underlying stocks, rebalancing frequency, and concentration risk. Family offices and portfolio management services often track such niche indices initially before potential mutual fund launches.
