Passive Folios Exceed 5 Crore, Reflecting Investor Shift Towards Low-Cost, Efficient Portfolios

Passive Fund Growth Continues Unabated in FY2026

Investor participation in passive products has continued to rise sharply in FY2026, despite a moderation in new passive fund launches. The growth is attributed to the increasing acceptance of low-cost index-based investing among both retail and institutional investors. According to data from India Passive Funds tracking NSE indices-linked products, ETF and index fund folios crossed 5.5 crore in March 2026.

The growth came from index funds, where folios nearly doubled between June 2025 and March 2026. Month-on-month growth also remained steady through the second half of FY26. Combined ETF and index fund folios increased from 5.11 crore in January 2026 to 5.33 crore in February and further to 5.54 crore in March, adding more than 40 lakh folios over two months.

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Experts attribute the trend to growing awareness around asset allocation, diversification, and long-term investing. Groww Mutual Fund CEO Varun Gupta notes that passive funds are becoming a more familiar and easy-to-understand investment option for a wider set of investors. He adds that investors are increasingly allocating part of their portfolios to passive products because of their simplicity, transparency, diversification, and ease of access.

According to Gupta, folio growth is being driven by both retail and institutional participation. Retail participation is being driven by greater awareness, ease of access, and the ability to participate across themes and market segments, while institutions are also using passive products for efficient asset allocation and targeted exposure.

The continued rise in folios comes despite slower NFO activity. Experts suggest that investors are increasingly allocating to existing passive products rather than only participating in fresh launches. By March 2026, the market had 522 passive schemes, including 288 index funds and 234 ETFs.

ICICI Prudential Asset Management Company's principal–investment strategy Chintan Haria explains that investor adoption is now being driven by a mix of lower costs, transparency, simplicity, and rising awareness, alongside the consistent performance of broad-market indices. Haria notes that passive investing is also benefiting from a broader shift in investor behavior toward simplicity and consistency in long-term wealth creation.

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Haria adds that while institutional investors remain significant participants in ETFs, retail participation has also expanded steadily through SIPs, smaller ticket sizes, and digital platforms. He notes that ETFs continue to attract investors because of their liquidity, flexibility, and cost efficiency.

On the outlook for the industry, experts say that both active and passive strategies are likely to coexist in India over the next few years. Haria notes that the future is likely to be more about portfolio blending and investor customization rather than active or passive replacing one another.