Rather than worrying about ETF vs Fund, the more important things to worry about while investing in an Index Fund in India are
- Tracking Errors
A lot of index funds show major tracking errors in tracking the index - i.e. they are quite out of sync with the index for whatever reasons. For the Nifty index, I have found that the GS Benchmark Nifty Index Fund (which is an ETF) and the UTI Nifty Index fund (non-ETF) both have low tracking errors as compared to others.
- Expense ratios
One of the reasons to go for an index fund is to also save on costs - for e.g. Vangaurd in the US has expense ratios as low as 0.10% on it's index funds. Unfortunately, Indian Index funds have expense ratios as high 1% & even 1.5%. Again the 2 funds I mentioned earlier have decent (but not low expense ratios) - I think it's around 0.50%.
CNX-500 is a broad index. But when I checked CNX-500 Index funds last (it's been a few years), they had ridiculous expense ratios, so I didn't go for them.
Nifty + Nifty Junior covers around 100 stocks - this is what I usually buy - equal monetary amounts of a Nifty fund & a Nifty Junior fund at the same time.