India's Passive Fund Market Soars: AUM Reaches ₹12.2 Lakh Crore
Motilal Oswal Mutual Fund's Passive Survey 2025 reveals significant growth in India's passive investment sector. The assets under management (AUM) have grown 6.4 times over six years, reaching ₹12.2 lakh crore. The sector has seen a 36% CAGR since 2019 and 26% annual growth since 2023. 68% of investors now hold at least one passive fund, with 85% holding their investments for over three years. Millennials are driving demand, and digital platforms are the preferred investment channel. Distributors are bullish, with 93% planning to increase passive fund allocations. Low costs, diversification, and transparency are key growth factors, while smart beta strategies are gaining popularity.
*this image is generated using AI for illustrative purposes only.
India's passive investment landscape has undergone a remarkable transformation over the past six years, according to the latest Passive Survey 2025 conducted by Motilal Oswal Mutual Fund. The survey reveals a significant surge in assets under management (AUM) and growing investor interest in passive investment strategies.
Key Highlights
| Metric | Value |
|---|---|
| Current Passive Fund AUM | ₹12.2 lakh crore |
| AUM Growth (6 years) | 6.4 times |
| CAGR since 2019 | 36.00% |
| Annual Growth since 2023 | 26.00% |
| Investors holding at least one passive fund | 68.00% |
Investor Preferences and Trends
The survey indicates a strong shift towards passive investing strategies among Indian investors. Here are some notable findings:
Long-term Perspective: 85% of respondents have held their passive investments for more than three years, indicating a preference for long-term wealth creation.
Popular Choices: Investors show a clear preference for broad-based equity indices, followed by commodities and thematic products.
Millennial Demand: The survey highlights that millennial investors are driving the strongest demand for passive funds.
Digital Adoption: Digital platforms have emerged as the dominant channel for passive fund investments, reflecting the increasing tech-savvy nature of investors.
Distributor Outlook
The survey also sheds light on the perspective of financial distributors:
- 93% of distributors plan to increase passive fund allocations for their clients in FY25-26.
- This indicates a growing recognition of the benefits of passive investing among financial advisors.
Investor Holdings
| Metric | Percentage |
|---|---|
| Investors holding fewer than 3 passive funds | 70.00% |
This statistic suggests there's still significant room for growth and diversification within investors' passive fund portfolios.
Factors Driving Passive Fund Growth
The survey identifies several key factors contributing to the popularity of passive funds:
- Low costs
- Diversification benefits
- Transparency
Emerging Trends
The survey also highlights the growing interest in smart beta strategies, which focus on specific factors such as:
- Momentum
- Quality
- Value
These strategies are gaining traction among investors looking for a middle ground between active and passive investing.
As passive investing continues to gain momentum in India, it's clear that investors are increasingly recognizing the benefits of this approach. The significant growth in AUM and the positive outlook from both investors and distributors suggest that passive funds are likely to play an even more prominent role in Indian investment portfolios in the coming years.
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