Passive Fund Folios Cross 5.5 Crore In FY26 As Index Investing Gains Ground

The interest among investors towards passive mutual fund schemes increased in FY26, with the total folio base in ETFs and index funds surging past 5.5 crore, per data related to NSE-passive schemes.

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The growth came despite slower launches of new passive products during the year, indicating that investors continued to allocate money into existing index-based investment options.

Data showed ETF folios crossed 4 crore in March, while index fund folios rose above 1.5 crore. The growth in index funds was more prominent in folio addition since it nearly doubled between June 2025 and March 2026.

The total folios of both ETFs and index funds rose from 5.11 crore in January 2026 to 5.33 crore in February, and then to 5.54 crore in March.

Retail, Institutional Participation Expands

Industry participants said passive products are witnessing broader adoption among both retail and institutional investors due to lower costs, transparency and ease of investing.

Varun Gupta, Chief Executive Officer at Groww Mutual Fund, said passive investing is becoming increasingly accessible to a larger set of investors as awareness around diversification and long-term investing improves.

According to Gupta, investors are allocating a portion of their portfolios to passive strategies because of their relatively simple structure and broader market exposure.

He added that growth in passive fund folios has continued even as new fund offer activity moderated during the year.

The number of passive schemes in the market stood at 522 by March 2026, including 288 index funds and 234 ETFs.

Index Funds See Faster Growth

Index funds recorded stronger folio expansion compared to ETFs during the financial year. Industry executives attributed the trend to increased retail participation through systematic investment plans and digital investment platforms.

Chintan Haria, Principal – Investment Strategy at ICICI Prudential Asset Management Company, said passive products are benefiting from a combination of lower expense ratios, transparency and growing investor familiarity with market-linked investments.

He said the shift also reflects changing investor behaviour, with more participants preferring simpler long-term investment approaches.

ETFs, meanwhile, continued to attract institutional flows because of liquidity and trading flexibility. Retail participation in ETFs has also increased alongside the expansion of demat account and digital broking platforms in recent years.

Passive And Active Strategies Expected To Coexist

Market participants said passive investing still has significant room for expansion in India as investor awareness continues to improve across categories and geographies.

Active and passive investment styles are anticipated to complement each other in future rather than substitute for each other. Investors seem to be moving towards a trend that integrates both these styles.

Passive fund investment is happening against the backdrop of overall growth in India’s mutual funds industry, which can be attributed to growing financialization of personal savings and increased participation of households in the capital markets.