Retail investors drive 12x growth in index fund folios, Zerodha Fund House study finds

According to the report, total retail folios in index funds increased from 4.95 lakhs in March 2020 to 59.37 lakhs in December 2023.

The total retail folios in index funds has increased by nearly 12 times over the last three years, a study by Zerodha Fund House has found. The total number of index mutual funds has also grown to around 207 in March 2024 from 44 in March 2020, accounting for an absolute growth of 370 percent.

According to the report, total retail folios in index funds increased from 4.95 lakhs in March 2020 to 59.37 lakhs in December 2023. There has also been a substantial rise in total AUM of index funds (both equity and debt) by around 25 times to Rs 2,13,500 crore, approximately, as of March 2024, from March 2020, the report notes. Debt index funds currently constitute around 51.5 percent of the total AUM.

Debt index funds, it adds, have seen a sizable growth from "negligible to no AUM" till March 2021 to almost surpass the milestone AUM of Rs 1.1 lakh crores in March 2024.

As of March 31, 2024, there are 120 and 87 equity and debt index funds, respectively, the report states.

The Nifty 50 index dominates the AUM of these funds with 70.7 percent of total AUM at Rs 52,000 crore, indicating a clear preference for large-cap stocks, the report suggests. It adds that the Nifty Next 50 index, with 14.6 percent of total AUM at Rs 10,000 crore, along with smaller allocations to mid and small-cap stocks, suggests a balanced approach to risk and return among investors.

At a record high

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The index funds category assets were at a record high of Rs 2.43 lakh crore as of June 2024, the report noted, adding that it has seen a surge of nearly 900 percent in assets in the past three years. "Across all the other mutual fund categories, index funds witnessed the highest AUM growth over the past three years,” the report stated.