The Indian mutual fund industry has grown by leaps and bounds over the last decade, with assets under management (AUM) surging more than seven times to Rs 74.40 lakh crore by the end of June 2025.
One major trend shaping this growth is the steady rise of passive mutual funds, with both retail and institutional investors showing interest due to the low-cost, transparent, and benchmark-aligned nature of these products.
According to a recent Motilal Oswal Mutual Fund study, passive funds now account for around 17% of the industry’s total AUM. This shows a slight shift in investor preference from traditional active strategies to simpler, market-linked products.
Passive funds saw Rs 36,000 crore net inflows in the June quarter
In the June 2025 quarter alone, passive funds attracted Rs 36,000 crore in net inflows, led largely by broad-based and large-cap index funds, said the study report, which is based on AMFI & ACE Mutual Fund data.
Pratik Oswal, Head – Passive Business, Motilal Oswal Asset Management Company Ltd (MOAMC), said, “This quarter reflects a notable shift in portfolio allocation —a growing tilt toward well-diversified, resilient portfolios, complemented by a measured return to debt. What’s particularly encouraging is the increasing traction seen in passive investing.”
Equity funds, however, still command the largest share at 59.94%, followed by debt at 26.53%, hybrid at 8.28%, and other categories accounting for 5.26%.
So while active funds continue to dominate in absolute terms, the growing share of passive strategies reflects broader adoption of low-cost, transparent, and benchmark-aligned approaches, the study report said.
In the quarter ending June 2025, total estimated net inflows stood at Rs 3.98 lakh crore. This was largely led by the debt segment, which drew Rs 2.39 lakh crore, reversing the previous quarter’s outflows. Equities contributed Rs 1.33 lakh crore, while commodities added Rs 9,000 crore. Active strategies accounted for Rs 3.62 lakh crore of total inflows, with passive funds contributing Rs 36,000 crore.
Broad-based funds emerged as the dominant category within equities
Within equities, broad-based funds emerged as the dominant category, garnering Rs 86,000 crore in net inflows. This category captured 64% of total equity flows — 55% from active funds and a notable 106% from passives — indicating increased allocation to passive equity strategies.
Among active broad-based funds, Flexi Cap led with Rs 15,800 crore, followed by Small Cap at Rs 12,000 crore and Mid Cap at Rs 10,800 crore. In the passive space, Large Cap funds remained the most allocated segment, reflecting continued focus on blue-chip benchmarks.