Mutual Funds passive-investing

Passive investing wave in India

From WebNotes, a public knowledge base. Last updated 19 May 2026. Reading time ~4 min.

The passive investing wave in India has been one of the most significant industry shifts since 2018. Passive funds (index funds, ETFs) have grown from negligible AUM in 2015 to over 15% of industry AUM by 2025, driven by lower TER, transparent benchmarking, and the active-fund underperformance documented over multi-year periods.

Growth trajectory

Year	Passive AUM (Rs lakh crore, approximate)	% of industry
2015	0.2	2%
2018	0.5	4%
2020	1.5	5%
2022	4.0	9%
2024	8.0	14%
2025	10.0+	15%+

Drivers

Cost

Index fund TER: 0.1 to 0.35%.
ETF TER: 0.05 to 0.20%.
vs Active fund TER: 1 to 2%.
100+ bps annual differential compounds materially.

Performance evidence

Significant percentage of Indian active large-cap funds underperform benchmark over 5 to 10 years.
SPIVA (S&P) India reports document active-fund underperformance.
Investors increasingly accept passive returns over uncertain active outperformance.

Distribution channels

Direct-plan platforms lowered cost barriers.
Index-fund SIPs as simple as active-fund SIPs.

Leading passive schemes

NIFTY 50 trackers

NIFTY 50 index fund variants from major AMCs.
Nifty BeES ETF (oldest).

Broader-market trackers

International

S&P 500 FoFs and ETFs.
Nasdaq 100 FoFs and ETFs.

Specialty

Gold ETFs.
Bharat Bond ETF.
Sectoral / thematic ETFs.

Active vs passive debate

Per active vs passive equity India :

Large-cap: passive often superior post-TER.
Mid-cap / small-cap: active may add value but harder to identify ex-ante.
Sector-rotation: active discretion can outperform sectoral indices.

Outlook

Industry projections:

25 to 30% passive share by 2028-2030.
Continued ETF launches.
Smart-beta and factor-based passive growing.

External references

References

AMFI public records and industry data.
SEBI (Mutual Funds) Regulations 1996.
Indian financial press coverage.

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 19 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.