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India’s Passive Fund Boom: AUM Jumps 6.4x to Rs 12.2 Lakh Crore

Massive Surge in India’s Passive Investment Market

India’s passive investment landscape has seen explosive growth. According to the Motilal Oswal Mutual Fund Passive Survey 2025, total assets under management (AUM) for passive funds have risen 6.4 times to Rs 12.2 lakh crore over six years. The data shows a 36% compound annual growth rate (CAGR) since 2019 and 26% CAGR since 2023, reflecting strong investor adoption of low-cost, diversified strategies.

What’s Driving the Shift Toward Passive Funds in India?

Low cost, transparency, and ease of diversification are key reasons investors are turning to passive investing. The survey revealed that 68% of investors now hold at least one passive fund, compared to 61% in 2023. These numbers highlight a growing preference for simple, index-linked wealth creation.

Interestingly, 85% of respondents said they have held passive investments for more than three years — showing that most investors now view index funds and ETFs as reliable long-term options.

Most Popular Passive Funds: Equity Indices Lead the Pack

Indian investors continue to favor broad-based equity index funds like the Nifty 50 and S&P BSE Sensex. However, thematic and commodity-based funds are gaining attention. Meanwhile, smart beta strategies — those built around momentum, quality, or value factors — are reshaping how investors view passive products.

Distributors and Millennials Power the Next Phase of Growth

As per the report, 93% of mutual fund distributors plan to boost client allocations to passive funds in FY25–26. Despite this enthusiasm, 70% of investors still hold fewer than three passive funds, leaving significant room for expansion.

Millennial investors are driving much of this demand. The rise of mobile-based investing and digital platforms has made it easier than ever to access and manage passive portfolios online.

Smart Beta Funds and Digital Platforms Gain Momentum

Smart beta funds — which blend passive investing with data-driven active elements — are gaining popularity among informed investors. Strategies that track momentum, quality, and value are seeing strong inflows.

At the same time, digital platforms such as Groww, Zerodha, and Kuvera are playing a vital role in democratizing investing in India. Their easy interfaces, real-time analytics, and low costs are fueling adoption across both urban and smaller cities.

Future Outlook: Passive Investing to Cross Rs 20 Lakh Crore by FY2027

Experts estimate that if current trends persist, India’s passive fund AUM could exceed Rs 20 lakh crore by FY2027. The country’s expanding investor base, increasing digital access, and cost-conscious approach will continue to propel this transformation.

As financial literacy grows, passive investing is becoming the preferred strategy for Indian households and professionals looking for stable, long-term wealth creation.

Key Insights from Motilal Oswal Passive Survey 2025

  • Passive fund AUM rose 6.4x to Rs 12.2 lakh crore in six years.
  • 68% of Indian investors now own at least one passive fund.
  • Smart beta and thematic strategies are gaining popularity.
  • 93% of distributors plan higher passive allocations in FY25–26.
  • Millennials and digital platforms are key growth drivers.

Source: Motilal Oswal Mutual Fund – Passive Survey 2025

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