India’s mutual fund landscape is experiencing a structural shift towards passive investing, with QAAUM share rising to ~17.1% as of Sep’25 (vs 7% in FY20). Over Sep’21–Sep’25, ETFs/Index Funds delivered AUM CAGRs of 28%/81% (vs total equity at 28%).
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Motilal Oswal Report
The outlook for passives in India remains structurally strong, underpinned by expanding institutional adoption, digital distribution, and evolving product innovation.
Over the medium term, the segment is expected to see broader diversification beyond plain vanilla index products, with rising traction in factor-based, thematic, and global indices aiding differentiation for AMCs.
The newly introduced MF Lite framework is likely to attract fintechs, brokers, and global passive specialists, further intensifying competition while broadening investor access.
Although yield compression will persist as the passive mix rises, scale benefits and operational efficiency will offset some of the margin impact for larger AMCs.
Retail participation, currently underpenetrated, should accelerate with growing investor awareness and direct-plan preferences through digital channels. As ETF volumes deepen, tracking efficiency and liquidity management will emerge as critical differentiators.
Over the next four–five years, India’s passive share could converge toward 25–30% of total MF AUM, mirroring the global trend toward low-cost, transparent investment products.
We continue to remain constructive on the entire MF ecosystem.
Our top picks in this space include Aditya Birla SunLife AMC, Nippon AMC, CAMS, and Nuvama.
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