Passive funds gain traction; AUM crosses Rs 7 lakh crore in May

exchange-traded funds

The popularity of passive funds like exchange-traded funds (ETFs) and index funds has been growing consistently, with assets under management surpassing the Rs 7 lakh crore mark in May-end.

During the last five years, the asset base of the passive fund industry has increased with an annualised growth rate of 53 per cent. It rose from Rs 80,755 crore as on March 2018 to Rs 6.75 lakh crore in March 2023, National Stock Exchange (NSE) said in a statement.  In addition, the number of passive funds available in the country has also climbed from 90 to 349 during the period.

After achieving Rs 6.75 lakh crore, the AUM of the passive funds has further shot up to Rs 7.17 lakh crore as on May 31 this year, the exchange noted.

The financial year 2022-23 was a landmark year for the Indian passive funds industry as it registered record fund inflows of Rs 1.55 lakh crore and 121 new passive products were launched during the period.

Overall, there are 356 unique numbers of products available in the market. This includes 228 equity products and 107 debt products with AUM of 4.93 lakh crore and 1.98 lakh crore, respectively.

Further, there are 13 gold and 8 silver products available in the market for investors.

A passive fund is targeted at tracking the returns of the benchmark index, on the other hand, in active investing, the fund manager is entirely involved in the investment process.

Further, the AUM  of passive funds (ETF and Index Funds) tracking Nifty indices has crossed a new milestone of Rs 5 lakh as of May 31, 2023. Besides, 251 passive funds were tracking 101 unique Nifty indices as of May this year.

Nifty indices-linked passive funds account for about 72 per cent of total equity and debt passive funds AUM and 75 per cent of the total number of equity and debt passive funds in the country.

Mukesh Agarwal, CEO, of NSE Indices, said that passive funds are well suited for retail and institutional investors to invest in capital markets.

Large international fund managers also launch ETFs linked to Nifty indices, which are listed in global markets. Currently, there are 16 ETFs listed outside India with a combined AUM of USD 1.3 billion.