diff --git a/helpers/python.ts b/helpers/python.ts
index 0c41909b..61f6f12c 100644
--- a/helpers/python.ts
+++ b/helpers/python.ts
@@ -223,58 +223,39 @@ export const installPythonTemplate = async ({
   const compPath = path.join(templatesDir, "components");
   const enginePath = path.join(root, "app", "engine");
 
-  if (dataSources.length > 0) {
-    // copy vector db component
-    const vectorDbDirName = vectorDb ?? "none";
-    const VectorDBPath = path.join(
-      compPath,
-      "vectordbs",
-      "python",
-      vectorDbDirName,
-    );
-    await copy("**", enginePath, {
-      parents: true,
-      cwd: VectorDBPath,
-    });
+  // Copy selected vector DB
+  await copy("**", enginePath, {
+    parents: true,
+    cwd: path.join(compPath, "vectordbs", "python", vectorDb ?? "none"),
+  });
 
-    // Copy loaders to enginePath
-    const loaderPath = path.join(enginePath, "loaders");
-    await copy("**", loaderPath, {
-      parents: true,
-      cwd: path.join(compPath, "loaders", "python"),
-    });
+  // Copy all loaders to enginePath
+  const loaderPath = path.join(enginePath, "loaders");
+  await copy("**", loaderPath, {
+    parents: true,
+    cwd: path.join(compPath, "loaders", "python"),
+  });
 
-    // Generate loaders config
-    await writeLoadersConfig(root, dataSources, useLlamaParse);
-  }
+  // write configuration for  loaders
+  await writeLoadersConfig(root, dataSources, useLlamaParse);
 
-  // Copy engine code
-  if (tools && tools.length > 0) {
-    console.log("\nUsing agent chat engine\n");
-    await copy("**", enginePath, {
-      parents: true,
-      cwd: path.join(compPath, "engines", "python", "agent"),
-    });
-    // Write tool configs
-    const configContent: Record<string, any> = {};
-    tools.forEach((tool) => {
-      configContent[tool.name] = tool.config ?? {};
-    });
-    const configFilePath = path.join(root, "config/tools.yaml");
-    await fs.mkdir(path.join(root, "config"), { recursive: true });
-    await fs.writeFile(configFilePath, yaml.stringify(configContent));
-  } else if (dataSources.length > 0) {
-    console.log("\nUsing context chat engine\n");
-    await copy("**", enginePath, {
-      parents: true,
-      cwd: path.join(compPath, "engines", "python", "chat"),
-    });
+  // Select engine code based on data sources and tools
+  let engine;
+  tools = tools ?? [];
+  if (dataSources.length > 0 && tools.length === 0) {
+    console.log("\nNo tools selected - use optimized context chat engine\n");
+    engine = "chat";
   } else {
-    console.log(
-      "\nUsing simple chat as neither a datasource nor tools are selected\n",
-    );
+    engine = "agent";
+    await writeToolsConfig(root, tools);
   }
 
+  // Copy engine code
+  await copy("**", enginePath, {
+    parents: true,
+    cwd: path.join(compPath, "engines", "python", engine),
+  });
+
   const addOnDependencies = dataSources
     .map((ds) => getAdditionalDependencies(vectorDb, ds, tools))
     .flat();
@@ -290,11 +271,23 @@ export const installPythonTemplate = async ({
   });
 };
 
+async function writeToolsConfig(root: string, tools: Tool[]) {
+  if (tools.length === 0) return; // no tools selected, no config need
+  const configContent: Record<string, any> = {};
+  tools.forEach((tool) => {
+    configContent[tool.name] = tool.config ?? {};
+  });
+  const configFilePath = path.join(root, "config", "tools.yaml");
+  await fs.mkdir(path.join(root, "config"), { recursive: true });
+  await fs.writeFile(configFilePath, yaml.stringify(configContent));
+}
+
 async function writeLoadersConfig(
   root: string,
   dataSources: TemplateDataSource[],
   useLlamaParse?: boolean,
 ) {
+  if (dataSources.length === 0) return; // no datasources, no config needed
   const loaderConfig = new Document({});
   // Web loader config
   if (dataSources.some((ds) => ds.type === "web")) {
@@ -361,9 +354,7 @@ async function writeLoadersConfig(
   }
 
   // Write loaders config
-  if (Object.keys(loaderConfig).length > 0) {
-    const loaderConfigPath = path.join(root, "config/loaders.yaml");
-    await fs.mkdir(path.join(root, "config"), { recursive: true });
-    await fs.writeFile(loaderConfigPath, yaml.stringify(loaderConfig));
-  }
+  const loaderConfigPath = path.join(root, "config/loaders.yaml");
+  await fs.mkdir(path.join(root, "config"), { recursive: true });
+  await fs.writeFile(loaderConfigPath, yaml.stringify(loaderConfig));
 }
diff --git a/templates/components/engines/python/agent/__init__.py b/templates/components/engines/python/agent/__init__.py
index 52e36394..b2222ad6 100644
--- a/templates/components/engines/python/agent/__init__.py
+++ b/templates/components/engines/python/agent/__init__.py
@@ -11,11 +11,12 @@ def get_chat_engine():
     top_k = os.getenv("TOP_K", "3")
     tools = []
 
-    # Add query tool
+    # Add query tool if index exists
     index = get_index()
-    query_engine = index.as_query_engine(similarity_top_k=int(top_k))
-    query_engine_tool = QueryEngineTool.from_defaults(query_engine=query_engine)
-    tools.append(query_engine_tool)
+    if index is not None:
+        query_engine = index.as_query_engine(similarity_top_k=int(top_k))
+        query_engine_tool = QueryEngineTool.from_defaults(query_engine=query_engine)
+        tools.append(query_engine_tool)
 
     # Add additional tools
     tools += ToolFactory.from_env()
diff --git a/templates/components/engines/python/agent/tools.py b/templates/components/engines/python/agent/tools.py
index 93f63c44..584947e8 100644
--- a/templates/components/engines/python/agent/tools.py
+++ b/templates/components/engines/python/agent/tools.py
@@ -1,3 +1,4 @@
+import os
 import yaml
 import importlib
 
@@ -26,8 +27,9 @@ def create_tool(tool_name: str, **kwargs) -> list[FunctionTool]:
     @staticmethod
     def from_env() -> list[FunctionTool]:
         tools = []
-        with open("config/tools.yaml", "r") as f:
-            tool_configs = yaml.safe_load(f)
-            for name, config in tool_configs.items():
-                tools += ToolFactory.create_tool(name, **config)
+        if os.path.exists("config/tools.yaml"):
+            with open("config/tools.yaml", "r") as f:
+                tool_configs = yaml.safe_load(f)
+                for name, config in tool_configs.items():
+                    tools += ToolFactory.create_tool(name, **config)
         return tools
diff --git a/templates/components/engines/python/chat/__init__.py b/templates/components/engines/python/chat/__init__.py
index 65624c32..da1c3cdd 100644
--- a/templates/components/engines/python/chat/__init__.py
+++ b/templates/components/engines/python/chat/__init__.py
@@ -6,7 +6,13 @@ def get_chat_engine():
     system_prompt = os.getenv("SYSTEM_PROMPT")
     top_k = os.getenv("TOP_K", 3)
 
-    return get_index().as_chat_engine(
+    index = get_index()
+    if index is None:
+        raise Exception(
+            "StorageContext is empty - call 'python app/engine/generate.py' to generate the storage first"
+        )
+
+    return index.as_chat_engine(
         similarity_top_k=int(top_k),
         system_prompt=system_prompt,
         chat_mode="condense_plus_context",
diff --git a/templates/components/vectordbs/python/none/index.py b/templates/components/vectordbs/python/none/index.py
index 4dcc858a..8b77414a 100644
--- a/templates/components/vectordbs/python/none/index.py
+++ b/templates/components/vectordbs/python/none/index.py
@@ -11,10 +11,7 @@
 def get_index():
     # check if storage already exists
     if not os.path.exists(STORAGE_DIR):
-        raise Exception(
-            "StorageContext is empty - call 'python app/engine/generate.py' to generate the storage first"
-        )
-
+        return None
     # load the existing index
     logger.info(f"Loading index from {STORAGE_DIR}...")
     storage_context = StorageContext.from_defaults(persist_dir=STORAGE_DIR)