A survey has revealed that the assets under management (AUM) of passive mutual funds have jumped to Rs 12.2 lakh crore in 2025 from Rs 1.91 lakh crore in 2019, a 6.4-fold increase or 36% CAGR over 6 years. In just over two years since March 2023, the AUM of these funds has grown 1.7 times or 26% CAGR, according to Motilal Oswal Mutual Fund (MOMF) third edition of Passive Survey 2025.
The survey, conducted in August-September 2025, captured insights from 3000+ investors and 120+ distributors (including MF distributors, RIAs, and wealth managers) across India. The investor survey findings show that passive funds are becoming mainstream in India.
Awareness among investors about index funds or ETFs has grown
The survey showed that 76% respondents were aware of index funds or ETFs in 2025. About 68% investors have invested in at least one passive fund in 2025, up from 61% adoption in 2023. However, even with this adoption growth, one-third of investors remain outside, citing higher confidence in active funds or unfamiliarity with passive products,” the survey findings revealed.
What are the key factors retail investors look for when selecting funds?
Low costs (54%), diversification (46%), simplicity and transparency (46%), and performance (29%) have been key factors for mutual fund investors selecting passive funds.
93% MF distributors look to hike passive allocation by 5%
The survey also revealed that 93% of distributors understand passive funds, of which 46% have deep knowledge and 70% include them in their clients’ portfolios. Most distributors (93%) plan to further increase passive allocation by at least 5% in FY25-26. At present, 70% of their clients hold fewer than three passive funds, indicating that passive exposure plays a satellite role in portfolios, the survey findings say.
When choosing passive funds, the survey showed, 62% surveyed distributors said they added them into their product baskets for diversification. About 34% of respondents keep such funds due to low risk and 28% distributors claimed they had ease of understanding (28%).
Passive funds: Niche allocation to being embraced by a broader investor base
Commenting on the findings, Pratik Oswal, Chief of Passive Business at Motilal Oswal AMC, said, “In India, passive strategies have experienced significant growth in recent years, moving from being a niche allocation in only a few portfolios to being embraced by a broader investor base. Awareness is no longer limited to broad-based index solutions as investors are increasingly accepting factor-based funds and innovative passive strategies. With growing interest, passive investing is emerging as an important approach for investors seeking a disciplined way to participate in long-term wealth creation.”