India’s passive fund AUM surges over 6 times in six years, says Motilal Oswal

India’s passive investment landscape has experienced significant expansion over the past six years, with assets under management (AUM) rising 6.4 times to ₹12.2 lakh crore, according to the Motilal Oswal Mutual Fund’s Passive Survey 2025. The survey, included over 3,000 investors and 120 distributors nationwide, highlights a marked rise in the prevalence of passive funds, with 68% of investors now holding at least one such fund, compared to 61% in 2023.

Index funds and exchange-traded funds (ETFs) are increasingly becoming core components of investors’ long-term portfolios. The report shows passive fund AUM has grown at a compound annual growth rate (CAGR) of 36% since 2019, and 26% annually since 2023, driven by sustained interest from both retail and advisory investors.

According to survey findings, low costs, diversification, and transparency are the primary reasons for investors’ preference towards passive strategies.

Approximately 85% of respondents stated they retain these investments for more than three years, reflecting a long-term approach. The data indicates that most investors prefer broad-based equity indices, followed by commodities and thematic products.

Distributors are similarly optimistic, with 93% intending to increase passive allocations for clients in FY25–26, though 70% of investors hold fewer than three passive funds currently. Key assessment criteria include tracking error and expense ratio, with millennial investors exhibiting the greatest demand for passive funds, particularly via digital channels. The rise of smart beta strategies—including momentum, quality, and value factors—was also observed among emerging trends.

Pratik Oswal, Chief of Passive Business at Motilal Oswal AMC, said, “In India, passive strategies have moved from being a niche allocation to being embraced by a wider investor base. Investors are open to factor-based and innovative passive approaches as a disciplined way to participate in long-term wealth creation.”