2 days ago
India’s Passive Fund Assets Surge Fourfold Past ₹15 Lakh Crore
Passive mutual funds try to follow a market index instead of picking individual stocks.
Their assets in India have grown to more than ₹15 lakh crore.
This is over four times the amount reported five years earlier.
More than 5.5 crore investment accounts now hold passive funds.
Investors are using them as a basic part of their portfolios.
One reason is that many large-cap active funds have struggled to beat their benchmarks.
Experts say passive funds could grow from 18% to 20-25% of the industry.
Active funds may still be useful when investors judge them over longer periods.
Many investors may combine passive and active funds rather than choose only one.
Passive mutual fund assets rose more than fourfold to ₹15.14 lakh crore from ₹3.57 lakh crore over five years.
Passive funds now represent 18% of India’s mutual fund industry net AUM, with expectations of reaching 25%.
The number of passive-fund folios has increased eightfold to more than 5.5 crore.
Retail investors, institutions, advisers and retirement pools are driving wider adoption of passive strategies.
The SPIVA India year-end 2025 scorecard found that 75% of large-cap active funds underperformed their benchmarks over one year.
- Who
- Indian mutual fund investors, fund managers, advisers and institutions, including UTI AMC and Axis Mutual Fund.
- What
- Passive mutual fund assets have surged to ₹15.14 lakh crore, increasing their share of industry net AUM to 18%.
- Where
- India’s mutual fund industry.
- When
- The assets grew over five years from the ₹3.57 lakh crore recorded on July 31, 2021; the performance comparison cites the SPIVA India year-end 2025 scorecard.
- Why
- Growing retail and institutional participation, along with difficulty for large-cap active funds to consistently beat benchmarks, is supporting passive strategies.
Case for Passive Investing
Continuing Role for Active Management
Portfolio foundation
Case for Passive Investing
Passive funds offer an efficient way to capture market returns and are increasingly being used as core portfolio allocations.
Continuing Role for Active Management
Active funds remain relevant, particularly when evaluated over longer periods of preferably five years or more.
Beating large-cap benchmarks
Case for Passive Investing
Shrinking alpha and widespread research coverage make it increasingly difficult for large-cap active funds to generate consistent outperformance.
Continuing Role for Active Management
The growth of passive funds does not eliminate active management; investors can combine both strategies in their portfolios.
Key facts
- Passive assets
- ₹15.14 lakh crore
- Five-year starting assets
- ₹3.57 lakh crore as of July 31, 2021
- Current industry share
- 18% of net mutual fund industry AUM
- Projected share
- Industry participants expect passive funds to reach 20-25%, with some forecasting 25%.
- Passive-fund folios
- More than 5.5 crore, eight times the level of five years earlier
- One-year active underperformance
- 75% of large-cap active funds underperformed their benchmarks, according to the SPIVA India year-end 2025 scorecard
- Ten-year active underperformance
- 76.3% of large-cap active funds underperformed their benchmarks
Quotes
Sharwan Goyal
Executive vice-president and head of passive, arbitrage and quant strategies at UTI AMC
“The US offers an indication of how much the market can evolve, with passive funds accounting for over 55 per cent of US equity fund assets. In India, passive assets have increased from barely 1 per cent of the industry AUM in March 2015 to 18 per cent today.”
telegraphindia.com
“Shrinking alpha among large-cap funds has certainly made passive strategies more compelling. Large-cap companies are extensively researched and widely owned, reducing information asymmetry and making consistent alpha generation increasingly challenging.”
telegraphindia.com
Sources
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