Passive funds gain traction: now 17% of India's Rs 74 lakh crore MF industry
ADVERTISEMENT According to a recent study by Motilal Oswal Mutual Fund, this growth has been fuelled by structural reforms, increasing retail participation, and a shifting investment mindset that embraces both active and passive strategies.
Equity mutual funds continue to dominate the industry, accounting for nearly 60% of the total AUM, followed by debt (26.53%), hybrid (8.28%), and other categories (5.26%).
One of the key takeaways from the study is the growing preference for passive investing, which now accounts for around 17% of the industry's total AUM. While active funds still hold the lion's share, the rise of passive strategies highlights investors' increasing appetite for low-cost, transparent, and benchmark-aligned products.
In the quarter ending June 2025, total net inflows stood at Rs 3.98 lakh crore, led by the debt segment, which attracted Rs 2.39 lakh crore — marking a reversal from the previous quarter's outflows. Equity funds brought in Rs 1.33 lakh crore, while commodities added Rs 9,000 crore.
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Within equities, broad-based funds were the most popular, attracting Rs 86,000 crore in net inflows and capturing 64% of total equity flows. Of this, 55% came from active strategies and an impressive 106% from passive funds. This underscores the growing allocation toward passive equity strategies, particularly in the large-cap segment.
Among active equity categories, Flexi Cap funds led the pack with Rs 15,800 crore in net inflows, followed by Small Cap (Rs 12,000 crore) and Mid Cap (Rs 10,800 crore) funds. On the passive side, Large Cap funds remained the preferred choice, reflecting sustained interest in blue-chip companies.
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Thematic mutual funds experienced a net outflow of Rs 2,400 crore during the quarter, a sharp contrast to the Rs 8,400 crore inflow in the previous quarter. However, niche themes like Defence, Technology, and Business Cycle continued to attract capital, with the Defence theme alone drawing Rs 1,800 crore.
ADVERTISEMENT The debt segment made a strong comeback, led by constant maturity funds, which brought in Rs 2.04 lakh crore in net inflows. Corporate bond funds also saw renewed interest, pointing to increased institutional allocations amid shifting interest rate expectations.In the hybrid category, Multi Asset funds accounted for 57% of net inflows. Balanced Advantage Funds and Equity Savings Funds attracted Rs 4,200 crore and Rs 1,400 crore, respectively — highlighting sustained demand for balanced and risk-adjusted investment approaches.
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The quarter also saw 46 new fund offers (NFOs) launched, collectively raising Rs 6,506 crore. Interestingly, a significant portion of overall net inflows was contributed by five major AMCs, indicating a concentration of investor flows within a few large players.Commenting on the findings, Pratik Oswal, Head – Passive Business, Motilal Oswal Asset Management Company, 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.'He added that investors are gradually recognizing the structural benefits of passive funds — simplicity, cost-efficiency, and alignment with market benchmarks. While active strategies continue to dominate, particularly in mid- and small-cap segments, passive funds are now emerging as a staple for long-term portfolios.'The conversation is no longer just about chasing alpha,' Oswal noted. 'It's about achieving portfolio stability in an ever-changing economic environment.'
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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