How Are New Indices Encouraging Passive Investment in Indian Stock Market?

With the stock market witnessing increasing retail participation, the Indian stock exchanges are launching more indices. Just last Friday, the National Stock Exchange (NSE) launched a new index called the NSE Waves Index, which includes 43 media and entertainment companies.

So far in FY26, BSE and NSE have already launched 3 indices. In FY25, they launched a total of 41 indices – more than 3 every month. In comparison, only 7 indices were launched in FY23 and FY24, and none by BSE during that period.

Why So Many New Indices?

As per news reports, this increase in new indices is mainly driven by mutual fund houses. These fund houses want to offer passive investment options that track specific themes or sectors, like the media-focused NSE Waves Index. These themes attract investors and allow fund houses to launch new types of funds.

Exchanges also benefit from this trend. They earn a small percentage of the money collected by mutual fund schemes that are based on their indices.

SEBI’s Rules and Their Impact on Passive Investment Options

Another reason for the increase in indices is a rule by SEBI (Securities and Exchange Board of India). In 2022, SEBI introduced categorisation norms that stopped mutual funds from launching multiple schemes with similar investment goals under different names.

Now, fund houses must clearly place their schemes into one of 36 SEBI-defined categories. This pushed them to come up with new investment themes and strategies, especially in the passive fund space.

Conclusion

India’s mutual fund industry is growing fast, and the stock exchanges are helping by launching new indices. These changes offer more options to investors and support the growth of passive investing.

Read more on: Best Mutual Fund SIP Plan for May 2025: Motilal Oswal Midcap, ICIC Prud and More

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