Passive Funds Reach Record Flows Amid Market Corrections

Equity  Exchange-Traded Funds (ETFs) saw a significant increase in inflows in March, accounting for ₹23,820 crore. This was a sharp rise from ₹4,141 crore in February and higher than the earlier peak of ₹13,803 crore recorded in October 2024. 

The increase in ETF activity contributed the bulk of flows into passive equity schemes during the month. These instruments are typically used by institutional investors for large allocations. 

Combined Passive Inflows at Record High 

Total inflows into passive equity funds, including ETFs and index funds, stood at ₹30,235 crore in March.  

This is the highest monthly figure since the Association of Mutual Funds in India started releasing category-level data in April 2023. 

Index funds added ₹6,415 crore during the month, nearly twice the inflows recorded in February, indicating participation alongside ETFs. 

Market Conditions During the Month 

The rise in inflows coincided with a decline in domestic equity markets. The Nifty 50 ended March with a fall of over 11%. 

The decline was linked to global developments, including geopolitical tensions involving the United States and Iran. 

Activity Across Mutual Fund Categories 

Investment activity was not limited to passive funds. Active equity schemes also reported higher inflows during the month. Net inflows into active funds rose to ₹40,450 crore, marking the highest level in 8 months. 

Gross inflows into active schemes were close to ₹84,000 crore, showing continued allocations despite market volatility. 

Seasonal Trend and Institutional Participation 

ETF inflows in March have historically shown an increase, often associated with year-end allocation patterns. In March 2024 and March 2025, inflows stood at ₹10,314 crore and ₹11,808 crore, respectively, both representing annual highs. 

Given the nature of ETFs, a portion of these inflows is typically driven by institutional participants. 

Increase in Folio Additions 

Folio data indicates a rise in participation from individual investors. Domestic equity ETFs added around 600,000 folios in March, compared with about 400,000 in February. 

Equity index funds saw a net addition of approximately 242,000 folios. However, these figures remain below levels seen in the previous financial year. 

Read More: Equity Mutual Funds’ AAUM Surges 17% in FY26; Flexi Cap Funds Lead Growth! 

Conclusion 

March recorded higher inflows into passive equity funds alongside increased activity in mutual fund investments overall, supported by market movements and allocation trends. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.   
 
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