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Passive investing involves strategies like index funds, ETFs, and some fund of funds (FoFs). These products follow a specific market index by holding the same securities in similar proportions i.e., are rules‑based portfolios that track a benchmark rather than trying to beat it. The key idea is Performance moves in line with the benchmark index, subject to tracking error and costs. There is no attempt to pick “winning” stocks or time the market.
Passive investing has “been around” in India for years, but the adoption curve has steepened. January 2026 was a landmark month — not only for flows, but for what those flows signalled.
*Source: MFI Explorer, as of 30/01/2026. From 2019
to 2025, data as end of March. For 2026, data as of
30/01/2026.
Passive AUM reached ₹15 lakh crore in January 2026, with a
5-year Compounded annual growth rate over 24.61% is seen
as shown in the Graph above.
With the category clocking its highest‑ever monthly net
inflows (₹39,955 crore)—a month with gold ETFs (~₹24,040
crore) even surpassing equity fund inflows that month.
Note: Cells in green to red signify the highest to
lowest inflows in that period. Source: AMFI, Crisil
Intelligence
Think of passive investing like sailing on a ship that follows a defined route:
This analogy helps investors understand the mechanics, not the performance, of passive products.
Exchange-Traded Funds combine the convenience of mutual funds with the flexibility of stock trading. Listed on stock exchanges, ETFs can be bought and sold throughout the day through a demat account, offering:
These are mutual fund designed to replicate the performance of a specific market index, such as the Nifty 50, BSE Sensex or any other underlying index. By investing in the same securities as the index, these funds offer:
A Fund of Funds (FoF) invests in a portfolio of other mutual funds or ETFs, offering a layered diversification strategy. These funds are curated by expert managers to align with specific investment goals:
Passive isn’t just broad market. India offers sectoral, thematic, factor/smart‑beta, target‑maturity debt and commodity passives—all with rule‑based portfolios and SEBI‑defined guardrails, especially on debt index/ETF construction.
These features describe the design of passive funds—not their expected performance.
Policy decisions such as the RBI maintaining the repo rate at 5.25% (Feb 2026) form part of the economic backdrop in which investors evaluate different categories. This information is factual and does not signal any expected outcome.
Global and local markets may experience fluctuations. Passive funds offer index‑linked exposure without the need for frequent decision‑making at the security level. This describes how the structure works, not whether it is suitable for individual goals.
SEBI has issued publicly available guidelines on:
Passive investing has grown into an important part of India’s market landscape because of its clarity, transparency, and rules‑based structure. By following a defined index methodology, these products allow investors to understand exactly how the portfolio is built and what drives its movements—without relying on constant decision‑making or forecasting.
What makes passive strategies stand out is their consistency of process. The index rules, rebalancing schedules, and disclosures are publicly available, helping investors learn how markets, diversification, and asset allocation work in a straightforward way.
As India’s markets deepen and regulatory standards continue to emphasise transparency, passive investing serves as a simple and structured way for people to understand and participate in markets. It doesn’t promise more—it simply offers a transparent, rules‑based path that helps investors learn how market movements translate into portfolio outcomes, one index at a time.
An Investor Education and Awareness Initiative.
Investors should deal only with registered Mutual Funds, details of which can be verified on the SEBI website (https://www.sebi.gov.in ) under ‘Intermediaries/Market Infrastructure Institutions’. Please refer to website of mutual funds for process for completing one-time KYC (Know Your Customer) including process for change in address, phone number, bank details etc. Investors may lodge complaints on https://scores.sebi.gov.in against registered intermediaries if they are unsatisfied with their responses. SCORES facilitates you to lodge your complaint online with SEBI and subsequently view its status.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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