Passive Mutual Funds Gain Momentum in India with Assets Surging to ₹12.2 Lakh Crore

Passive mutual funds in India are witnessing unprecedented growth, with assets under management (AUM) reaching ₹12,20,000 crore (US$ 137.51 billion) in 2025. This marks a six-fold increase from ₹1,91,000 crore (US$ 21.53 billion) in 2019 and a 1.7x rise over just two years since March 2023. 

According to a Motilal Oswal Mutual Fund survey of over 3,000 investors and 120 distributors, awareness and adoption of passive investing are steadily increasing, signaling a shift in investment behavior toward long-term, cost-efficient strategies.

Investor Awareness and Adoption

The survey found that 76% of investors are aware of Index Funds or Exchange-Traded Funds (ETFs), and 68% had invested in at least one passive fund in 2025, up from 61% in 2023. However, about one-third of investors still prefer active funds or remain unfamiliar with passive products. Key drivers for adoption include low costs (54%), diversification (46%), simplicity and transparency (46%), and solid performance (29%). Investors largely use passive funds for financial independence (61%), retirement planning (49%), and portfolio diversification (31%), with most holding investments for over three years.

Distributor Trends and Insights

Distributors show a similar trend, with 93% understanding passive funds and 70% including them in client portfolios. Most plan to increase passive allocation by at least 5% in FY26, though 70% of clients currently hold fewer than three passive funds, highlighting its satellite role in portfolios.

Investment preferences lean toward a combination of systematic investment plans (SIPs) and lump sums (57%), reflecting a disciplined, long-term approach.

Also Read: Mutual Fund Industry's SIP Contributions Rise 20% YoY!

Conclusion

The rising popularity of passive mutual funds in India underscores a shift toward cost-efficient, diversified, and long-term wealth creation. With increasing awareness and distributor support, passive investing is poised for sustained growth in the coming years.

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.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.