India Passive Mutual Funds Hit ₹15.15 Lakh Cr by July 2026
By Market Desk
India’s passive mutual fund AUM reached ₹15.15 lakh crore by July 2026, driven by cost-efficiency and active fund underperformance. Explore the growth drivers and risks.
Passive scheme assets under management (AUM) in the Indian mutual fund industry hit Rs 15.15 lakh crore as of July 2026. This milestone represents approximately 18% of the total industry’s AUM, which stands at Rs 85.76 lakh crore.
- Passive AUM grew significantly from Rs 12.18 lakh crore recorded a year prior.
- Domestic equity funds constitute the largest share of passive assets, accounting for about 68.4%.
- Diversification into gold and silver ETFs also contributed to this notable growth.
The primary catalyst for this shift towards passive strategies, including index funds and ETFs, is their inherent cost-efficiency. These funds typically feature lower expense ratios when compared to actively managed alternatives.
Furthermore, the persistent underperformance of numerous active large-cap funds against their respective benchmarks has prompted investors to increasingly favor passive vehicles. This preference allows them to mirror broader market returns without the added cost of active management.
Navigating Passive Investment Risks
Despite their appeal, passive investing carries distinct risks that investors must consider. A key concern is tracking error, where a fund’s returns deviate from its underlying index.
These funds are also highly susceptible to broader market volatility, as they lack active management to mitigate downturns. Recent data highlights outflows from debt-related passive funds, indicating their sensitivity to interest rate changes and liquidity dynamics.
- Tracking error: Fund returns may not perfectly match the underlying index.
- Market volatility: No active mitigation during market downturns.
- Debt fund outflows: Sensitivity to interest rate shifts and liquidity conditions.
- Regulatory changes: Potential future adjustments from SEBI could impact the landscape.
Future Trajectory and Hybrid Strategies
The passive investing segment is poised for continued evolution, with many investors expected to adopt a hybrid approach. This strategy combines passive funds for achieving baseline market returns with active managers for specific alpha-generating opportunities.
Future growth in this sector will largely hinge on sustained retail participation and the effective management of tracking errors. This becomes increasingly critical as the number of available indices for passive investment expands across the market.