A core satellite portfolio is an investment strategy where your investments are divided into two major parts - “Core” and “Satellite”. The core is the main part of your portfolio and may be invested in less risker and low-cost mutual funds or index funds. Now, the second part, satellite, is smaller and may be invested in riskier or actively managed funds.
The ideology? The core can give you relative stability and long-term growth potential, while the satellite gives you a chance for better returns (without risking your entire portfolio).
Okay, so what is the core made of? Besides several low-risk investment options, such as government bonds or debt mutual funds, investors may also consider BSE Sensex Index funds for the core portion. These are index funds that track the S&P BSE Sensex, which represents 30 of India’s largest and most established companies based on free float market capitalization.
Want to learn more? In this article, let’s first learn what BSE Sensex Index Funds are and then see some other options you can consider for your core. Next, we will see some investment schemes for your satellite part.
Table of Content
What are BSE Sensex Index Funds?
BSE Sensex Index Funds are mutual fund schemes that invest in the same 30 companies that make up the S&P BSE Sensex Index. Do these funds try to beat the market? No! These funds simply track & replicate the performance of the BSE Sensex index by holding the same stocks in the same proportion (subject to tracking error).
When you invest in BSE Sensex Index mutual funds, your investment may grow in line with how the BSE Sensex performs. Furthermore, they are passively managed and usually have lower costs than actively managed funds.
4 Reasons Investors May Choose BSE Sensex Index Funds For Their Core Portfolio in 2025!
Sensex was launched in 1986 and has a market coverage of about 35.17% (in terms of market capitalisation, as of September 20, 2025) (Mention Source). Many investors now view it as the foundation of their core portfolio, as it provides exposure to over one-third of India’s stock market value through just 30 top companies! (Mention source & date)
For more clarity, let’s check out some other reasons why investing in BSE Sensex Index mutual funds may be a good choice:
Diversification Across Leading Companies
A BSE Sensex Index Fund invests in the 30 largest, most liquid, and financially sound companies in India. Usually, these companies are spread across different sectors such as:
Financial Services
Information Technology (IT)
Power
Consumer Durables, Consumer Service, FMCG
The potential advantage? Your money may not be tied to the performance of a single company or sector. If one sector underperforms, others may balance it out. Such diversification may reduce the overall risk and provide relative stability as compared to investing in individual stocks or sector.
Transparency of Holdings
The portfolio of a BSE Sensex Index Fund is completely transparent. That’s because it must replicate the BSE Sensex index. Thus, investors know exactly which 30 companies are included and how much weight each company has in the portfolio. This index is reviewed twice a year in June and December.
Such clarity may allow you to understand where your money is being invested and assess the sector exposure.
You Don’t Need to be a Market Expert
Investing in a BSE Sensex Index Fund may not require advanced market knowledge. Also, you are not required to spend time researching individual companies. That’s because the fund is structured to “mirror” the BSE Sensex Index.
Thus, it may be a simple way to invest in India’s top 30 companies based on free float market capitalization. This is particularly useful for beginners who may not be confident in stock selection.
Lower Costs and Market Returns
BSE Sensex Index Funds are passively managed, and they may have lower expense ratios compared to actively managed funds. Lower costs mean more of your returns stay in your pocket.
Additionally, because the fund mirrors the BSE Sensex Index, you don’t depend on a fund manager’s ability to pick stocks. You may simply earn the similar return as the broader market, subject to tracking error.
What is the Tata BSE Sensex Index Fund?
Tata BSE Sensex Index Fund is an open-ended equity scheme tracking BSE Sensex. The investment objective of the scheme is to reflect/mirror the market returns with a minimum tracking error. The scheme does not assure or guarantee any returns.
It does this by investing in the same 30 companies that are part of the BSE Sensex Index (in the same proportion as the index, subject to tracking error). However, the fund cannot guarantee or promise fixed returns, as returns depend on market performance.
For a better understanding, let’s check out some other key features of the Tata BSE Sensex Index Fund:
Benchmark
The fund is benchmarked against the BSE Sensex TRI (Total Return Index). For those unaware, a TRI index includes both stock price changes and dividends. It may be a more accurate comparison of returns.
Tracking Error
The fund tries to replicate the BSE Sensex. But there may be differences between the fund’s returns and the actual Sensex returns. This difference is called “tracking error”. However, the fund managers can try to keep this difference as minimum as possible.
Plans Available
The scheme only has the “growth option” and can be invested in the:
Entry Load and Exit Load
Entry Load | Exit Load |
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Risk Level
As an investor, you should understand that your principal may be at very high risk. The Tata BSE Sensex Index Fund could be suitable for long-term investors seeking capital appreciation and with very high risk tolerance.
Some Other Options for Your Core Portfolio
BSE Sensex Index Fund may be a part of your core portfolio, but you can’t rely only on equities. That’s because it increases the overall portfolio risk as stock markets can fluctuate.
Now, to minimize this risk, you may add less risky instruments to your core portfolio. These options may not give better returns, but may:
Provide relative stability
Aims to reduce portfolio volatility
Let’s check out some options you may consider:
Option | What It Is | What is the investment allocation | Why Investors May Choose It | Potential Options You May Consider |
Gilt Funds | Mutual funds that invest mainly in government bonds (backed by the Government of India). | Minimum 80% in G-secs (across all maturities) | They are considered one of the less riskier debt options since repayment is backed by the government. |
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Corporate Bond Funds | Mutual funds that invest in bonds, debentures, and money market instruments issued by companies. | Minimum 80% in corporate bonds (AA+ and above rated corporate debt instruments) | These funds can be less volatile than equities and may offer slightly higher returns than gilt funds. |
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Gold ETFs | Exchange-traded funds that track the price of gold and are traded on the stock exchange. | Hold physical gold or gold-related instruments approved by SEBI.
Can also invest up to 20% of net assets in the Gold Deposit Scheme of banks (GDS) & Gold Monetization Scheme (GMS).
| Gold has historically been a defensive asset, particularly during inflation or market uncertainty. |
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Where You May Invest in the Satellite Part?
After deciding on your core, it's time to pick investment schemes for the satellite part of your portfolio. Usually, the satellite part is composed of aggressive options, which may have the ability to generate comparatively better returns over the long term.. Some options you can consider are:
Mid- and Small-Cap Funds, such as, Tata Large & Mid Cap Fund
Sector/Thematic Funds
Direct stocks
REITs and INVITs
Conclusion
Wondering how much to allocate between core and satellite? Many investors use the Pareto principle, or the 80/20 rule. Under this approach, about 80% of the portfolio goes into the core for relative stability and long-term growth potential, while 20% is allocated to the satellite for return opportunities. However, you can always alter this allocation percentage based on your risk appetite and investment goals.
Now, for the core, BSE Sensex Index funds may be a good option. They:
Provide exposure to India’s 30 largest companies based on free float market capitalization.
Cover over one-third of India’s stock market value. (Mention Source and date)
Offer diversification across sectors.
Are low-cost and transparent.
Aims to Deliver returns that mirror market growth.
Within this space, the Tata BSE Sensex Index Fund is one option worth considering. However, you may not rely only on BSE Sensex Index funds. A balanced core can also include Gold ETFs, corporate bond funds, gilt funds, and other debt instruments. Your satellite portion can then focus on aggressive opportunities like thematic funds, mid- and small-cap funds, or individual stocks.
*Mutual Fund Investments are subject to market risks, please read all scheme related documents carefully.