3 days ago
Affluent Indian Investors Shift Toward Passive Funds for Predictability
Passive funds are investments designed to follow a market index instead of choosing stocks one by one.
More wealthy Indian investors are now using these funds.
Their share of passive fund assets almost tripled between March 2021 and March 2026.
They may like passive funds because returns can be more predictable and costs can be easier to understand.
Passive funds also reduce the risk of depending on one fund manager’s decisions.
Many active funds have not beaten their market benchmarks consistently.
Retail investors moved more toward active funds during a strong rally in mid- and small-cap stocks.
Experts think retail investors may return to passive funds as they learn more about them.
The share of high-net-worth investors in passive fund assets rose from 6.6% in March 2021 to 19.9% in March 2026.
Wealth managers say affluent investors are attracted by predictable returns, capital preservation and reduced dependence on individual fund managers.
Many actively managed equity schemes have struggled to consistently outperform their benchmarks, weakening the appeal of active investing.
Retail investors’ share of passive fund assets fell from 13.4% to 9.1% over the same period.
Experts expect passive investing to expand among both affluent and retail investors as products diversify and awareness improves.
- Who
- High-net-worth investors, retail investors, wealth managers and financial advisers in India.
- What
- Affluent investors are increasing their participation in passive mutual funds, while retail investors’ share is declining.
- Where
- India.
- When
- The comparison covers March 2021 to March 2026.
- Why
- Affluent investors are seeking more predictable returns, capital preservation and less dependence on individual fund managers, while many active schemes have struggled to beat benchmarks.
Passive Investing
Active Investing
Return predictability
Passive Investing
Passive funds can offer more predictable portfolio exposure and remove the additional risk linked to an individual fund manager’s performance.
Active Investing
Retail investors have pursued actively managed funds in the hope of generating higher alpha, particularly during the mid- and small-cap rally.
Performance versus benchmarks
Passive Investing
Affluent investors increasingly recognize that many active equity schemes have struggled to outperform their benchmarks, supporting passive products.
Active Investing
Active funds remain attractive to investors seeking opportunities to outperform a benchmark rather than simply track it.
Investor adoption
Passive Investing
HNI adoption is rising as products become better understood and expand into smart-beta, international and other market segments.
Active Investing
Retail participation in passive assets has declined, partly because investors were drawn to active funds during strong market performance.
Key facts
- HNI definition
- Investors investing more than Rs 2 lakh.
- HNI passive-fund share
- 19.9% in March 2026, up from 6.6% in March 2021.
- Retail passive-fund share
- 9.1% in March 2026, down from 13.4% in March 2021.
- Data sources
- Association of Mutual Funds in India and CRISIL Intelligence.
- Preferred strategies
- Some wealth managers are recommending smart-beta and other passive strategies.
- Active-fund performance
- Experts said many actively managed equity schemes have not consistently outperformed their benchmarks.
- Potential future trend
- Experts expect passive investing to broaden beyond large-cap indices and gradually gain more retail adoption.
Quotes
Shobhit Mathur
Co-founder of Ionic Wealth
“As these strategies become better understood, adoption should eventually filter down to retail investors as well.”
financialexpress.com
Sources
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