Exchange Traded Funds,Index Funds?

Are Index funds better than diversified equity funds in India?

Actively managed funds lose their shine as the market matures and hence outperforming broader market consistently for a long period is nearly impossible.

As far as India is concerned only around 100-300 stocks are well researched and actively traded in the market and hence provide liquidity. Fund houses which go beyond these stocks can always pick-up winners and hence beat the market index. Just look at the how a large cap fund FT India Bluechip fund can better the Sensex index by huge margin. An yet to mature market like India will always offer better opportunities for the fund manager for the next 10-15 years.

ETFs and Index funds have low expense ratios and that is plus point. But in the diversified funds vs ETF/Index funds they are not mutually exclusive and hence they can compliment any investor portfolio.

Good luck.

Look at it like this

ETF - Low Fee, No Manager, trades like a stock, so you can put limit and Stop orders on it.
Equity Funds - Higher Fee, Manager watching out for the portfolio and trying to adjust to market conditions.

If a Equity Fund has a good manager with a good record, it is worth it.