India’s passive investment space continues to expand, even as flows shift across asset classes. According to Association of Mutual Funds in India (AMFI) data, exchange traded funds (ETFs) drew net inflows worth ₹3,997 crore in June 2025 — lower than May’s ₹5,526 crore — with Gold ETFs dominating on safe-haven demand amid global macro uncertainty.
Despite this, the overall mutual fund industry’s AUM rose to a record ₹74.4 lakh crore.
This underlines investors’ sustained appetite for equities and passive strategies.
The Nifty 50, India’s flagship index, remains at the core of this trend, with index funds and ETFs tracking it witnessing a near fivefold jump in AUM over the past five years.
From May 2020 to May 2025, assets under management in Nifty 50 index funds and ETFs grew from around ₹89,000 crore to nearly ₹4.41 lakh crore.
Vandana Trivedi, Head – Institutional Business & Passives at Axis AMC, credits this surge to steady EPFO allocations, rising digital access, and cost efficiency.
“Retail investors now find it simple to access these products thanks to online platforms and rising awareness about the benefits of passive investing,” Trivedi said.
Lower expense ratios and the Nifty 50’s transparent structure have added to their appeal.
Retail joins institutional flows
While pension funds have long been major contributors, individual investors are fast catching up.
Shaily Gang, Head-Products at Tata Asset Management, noted that retail participation now accounts for nearly 80% of overall index fund flows. However, in the Nifty 50 index fund segment specifically, the split between retail and corporate investors is more balanced.
“Broad-based inflows show how passive products are no longer limited to institutions or HNIs. Retail investors, too, prefer the comfort of large, stable companies,” Gang said.
Simplicity and cost are key
Varun Gupta, CEO of Groww AMC, noted that the Nifty 50’s broad representation of India’s equity market makes it an attractive, low-cost gateway for many investors.
“Passive products give simple market exposure, but healthy flows into active funds show investors still value differentiated strategies and alpha potential too,” Gupta told CNBC-TV18.
Shrinking alpha narrows the gap
One factor behind this tilt towards passives is the shrinking alpha in active large-cap funds. Hemen Bhatia, Executive Director & CEO at Angel One AMC, said the average excess return generated by large-cap active funds over the Nifty 50 TRI has turned negative in recent years.
“As markets mature and financial inclusion rises, it’s harder for fund managers to beat the index consistently. Many investors prefer the certainty of market returns via passive products rather than relying on inconsistent alpha,” Bhatia explained.
More investors embrace a blended approach
Industry experts agree that passive investing is not replacing active funds entirely. Instead, investors are combining both to manage different market conditions.
“It’s not about active versus passive. It’s about using both wisely,” said Sharwan Goyal, Fund Manager and Head – Passive, Arbitrage and Quant Strategies at UTI AMC.
Goyal added that large-cap index funds offer stable, well-diversified exposure, especially when mid- and small-cap stocks trade at rich valuations.
He noted that smart-beta strategies — factor-based passive funds — are also gaining ground as investors look for more tailored index solutions.
Strong momentum ahead
Looking ahead, most industry voices expect passive large-cap allocations — led by the Nifty 50 and Sensex — to keep expanding.
“With nearly ₹12 lakh crore already invested across 600-plus index funds and ETFs, passive investing in India has scaled rapidly. Broader indices like the Nifty 100 and Nifty Midcap 50 are also attracting investors seeking cost efficiency and diversification,” Trivedi said.