Passive Fund Folio Additions Plummet to 2019 Low
By Market Desk
Passive fund folio additions hit a 2019 low in Q1FY27, with only 76,500 new folios added, a 99% drop, despite overall industry growth.
Mutual funds registered their lowest quarterly folio additions in passive funds since April 2019 during Q1FY27, adding only 76,500 folios. This marks a substantial 99% decrease from the 6.9 million additions recorded in the preceding quarter.
Despite this sharp decline in passive fund interest, the overall folio count for the industry reached an all-time high of 57.19 million in June 2026. Active equity funds, hybrid schemes, and debt schemes all posted significant additions during the same period.
Shifting Investor Preferences
- Active equity funds added 3.13 million folios.
- Hybrid schemes gained approximately 784,000 folios.
- Debt schemes added around 666,000 folios.
Sandeep Tandon of Quant Mutual Fund attributed the slump in gold and silver ETF folios to falling prices, which led to losses for investors who had entered the market at its peak. Investor interest shifted notably following an improved geopolitical situation in May and June, as noted by Alok Singh of Bank of India Mutual Fund.
- Gold ETFs added only 78,227 folios in Q1FY27.
- Silver ETFs recorded a decline of about 162,000 folios.
- Debt-oriented ETFs experienced a significant drop of nearly 944,000 folios.
Singh explained that gold and silver, lacking inherent cash flows, are heavily influenced by relative valuations, becoming less appealing when the US dollar performs strongly. This dynamic further redirected investor focus.
Active Strategies Outperform
Despite the downturn in commodity-linked schemes, equity-oriented domestic index funds and ETFs continued to attract investors. International ETFs and overseas fund of funds (FoFs) also demonstrated growth, indicating targeted investment flows.
- Equity-oriented domestic index funds added approximately 456,000 folios.
- Equity-oriented domestic ETFs added approximately 340,000 folios.
The selective performance observed in mid- and small-cap stocks made bottom-up stock selection increasingly critical, prompting investors to favor active equity schemes. Tandon also highlighted a global trend where passive schemes have underperformed active funds, contributing to this strategic shift.