New Delhi – The assets under management (AUM) of passive mutual funds in India have skyrocketed to ₹12.2 lakh crore in 2025 — a six-fold jump since 2019 — reflecting a compound annual growth rate (CAGR) of about 36 per cent, according to a report by Motilal Oswal Mutual Fund.
The report highlighted that awareness and adoption of passive investment products such as index funds and exchange-traded funds (ETFs) have grown significantly among retail investors. About 76 per cent of retail mutual fund investors are now aware of index funds or ETFs, and 68 per cent hold at least one passive product — up from around 61 per cent in 2023.
Despite the strong growth, nearly one-third of investors still remain outside the passive fund ecosystem, largely due to greater confidence in actively managed funds or lack of familiarity with passive options.
The top reasons investors cited for choosing passive funds were low costs (54%), diversification (46%), simplicity and transparency (46%), and consistent performance (29%).
Financial distributors have also shown increasing engagement, with 93 per cent reporting an understanding of passive funds and about 70 per cent already including them in client portfolios. Most distributors plan to boost passive allocations by at least 5 per cent in FY26. Their key selection criteria include tracking error and expense ratio, the report added.
“Awareness is no longer limited to broad-based index solutions. Investors are now embracing factor-based funds and innovative passive strategies,” said Pratik Oswal, Head of Passive Business at Motilal Oswal AMC.
Among current passive investors, 57 per cent hold one to three passive funds, while 17 per cent own more than five. In terms of product preference, 49 per cent invest in both index funds and ETFs, 34 per cent only in index funds, and 16 per cent only in ETFs.
With inputs from IANS