More Indians are choosing “passive funds” — these are index funds and exchange-traded funds (ETFs) that don’t try to outsmart the market. Instead, they simply mirror a market index, like the Nifty 50, by holding the same stocks in the same proportion. Think of it as buying a slice of the whole market rather than betting on a few hand-picked stocks. These funds now make up around 18% of all mutual fund money in India, up from 12% just four years ago, with total holdings of roughly Rs 14.2 lakh crore by December 2025 — a jump of about 31% in just one year.
Why the shift? Earlier, many investors hoped fund managers could consistently beat the market by picking winning stocks. But in large, well-tracked companies, this has become much harder to do consistently — so more people are choosing to simply track the market’s overall growth instead, at a lower cost and with full transparency of what they own.
A few things are fueling this trend: passive funds charge lower fees, they’re easy to understand since you know exactly what you’re buying, fund managers are finding it harder to beat large-company benchmarks, and mobile investing apps have made it simple for everyday investors to buy in. For someone investing in the stock market for the first time, passive funds can be a straightforward, low-cost way to get started.
This doesn’t mean actively-managed funds (where a fund manager actively picks stocks) have lost relevance — they can still add value in areas where skilled stock-picking matters more. Many investors now use both.
If you hold a ULIP (market linked policy), some of these now offer index-linked fund options too, giving you the same low-cost, transparent exposure to the market. Whether this suits you, depends on how much risk you are comfortable with, what you are saving for, and how long you plan to stay invested — it’s worth discussing with your financial advisor or relationship manager.
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