How Did India’s Passive Mutual Fund AUM Surge to Rs 12.2 Lakh Crore in Just 5 Years?
Click to start listening
Synopsis
The surge in passive mutual funds in India has been phenomenal, with assets reaching Rs 12.2 lakh crore in just five years. More investors are aware and engaging with these funds, signaling a shift in investment strategies. Discover the factors driving this remarkable growth and what it means for the future of investing.
Key Takeaways
- Passive mutual funds AUM surged to Rs 12.2 lakh crore in 2025.
- 6.4-fold growth since 2019.
- Approximately 76 percent of investors are aware of index funds.
- Key reasons for investing include low costs and diversification.
- Distributors are increasingly integrating passive funds into client portfolios.
New Delhi, Oct 6 (NationPress) The assets under management of passive mutual funds in India soared to Rs 12.2 lakh crore in 2025, representing a remarkable 6.4-fold increase since 2019, with a compound annual growth rate of around 36 percent, according to a report released on Monday.
As of 2025, approximately 76 percent of retail mutual fund investors are aware of index funds or ETFs, with 68 percent possessing at least one passive product, up from roughly 61 percent in 2023, the report by Motilal Oswal Mutual Fund indicated.
Despite this growth, nearly one-third of investors are still outside the realm of passive mutual funds, primarily due to a greater trust in active funds or a lack of familiarity with passive options.
When selecting passive funds, around 54 percent of investors pointed to low costs, while 46 percent cited diversification and simplicity, and 29 percent chose performance as their key criteria.
Distributors also showed strong engagement, with 93 percent expressing a clear understanding of passive funds. About 70 percent include them in client portfolios, and most plan to boost passive allocations by at least 5 percent in fiscal 2026.
Distributors primarily base their selection of passive funds on tracking error and expense ratio. "Awareness is expanding beyond just broad-based index solutions, as investors are increasingly embracing factor-based funds and innovative passive strategies," stated Pratik Oswal, Chief of Passive Business at Motilal Oswal AMC.
Among those investing in passive funds, over half (57 percent) hold one to three funds, while approximately 17 percent own more than five. In terms of preferences, 49 percent invest in both index funds and ETFs, 34 percent exclusively in index funds, and 16 percent only in ETFs, as noted in the report.
Point of View
It’s our duty to keep a close watch on the evolving financial landscape in India. The significant growth in passive mutual funds reflects a broader trend towards transparency and cost-effectiveness in investing. However, the persistent skepticism towards passive options by some investors highlights the need for ongoing education in the financial sector.
NationPress
06/10/2025
Frequently Asked Questions
What are passive mutual funds?
Passive mutual funds aim to replicate the performance of a specific index, offering a low-cost investment option.
Why are passive mutual funds becoming popular?
Their popularity stems from lower fees, transparency, and the ease of diversification they provide.
How much did the AUM of passive mutual funds grow?
The AUM grew to Rs 12.2 lakh crore, a 6.4-fold increase since 2019.
What percentage of investors are aware of index funds?
Approximately 76 percent of retail mutual fund investors are now aware of index funds or ETFs.
What are the key factors driving investment in passive funds?
Investors cite low costs, diversification, simplicity, and transparency as key factors in choosing passive funds.
