India's passive mutual fund space — comprising index funds and ETFs — attracted net inflows of Rs 12,480 crore in April 2026, crossing 30% of total equity fund net inflows for the first time. This marks a significant milestone in India's passive investing adoption journey, which began accelerating after SEBI's 2017 categorisation circular that made it harder for active funds to differentiate themselves. Index funds and ETFs now manage Rs 9.2 lakh crore — 13% of total industry AUM.
Nifty 50 index funds from SBI, HDFC, ICICI Prudential and UTI attracted the largest inflows, while Nifty Next 50, Nifty Midcap 150 and Nifty 500 index funds also saw robust demand. New SIP registrations into passive funds grew 48% year-on-year in April as retail investors increasingly embrace the low-cost, diversified and transparent nature of index investing. The expense ratios of leading index funds range from just 0.05% to 0.20% — a fraction of the 1.5-2.0% charged by most active equity funds.
Financial researchers have noted that a majority of active large-cap funds in India have failed to beat the Nifty 50 index over 5 and 10-year periods after accounting for costs, making the case for index funds in the large-cap category compelling. However, in mid and small-cap categories, skilled active managers have historically outperformed, making the case for active management stronger. The optimal approach for most investors is a core-satellite portfolio with index funds as the core and selective active funds as the satellite component for potential alpha generation.
