Passive Investing Boom 2026: What’s Driving Investment In Index Funds and ETFs

Passive investing is witnessing a boom in participation amid an overall surge in mutual fund participation in 2026. According to the Association of Mutual Funds in India (Amfi)- Crisil Factbook 2026, the assets under management (AUM) of passive fund assets grew to Rs 13.73 lakh crore as of March 2026.

According to the study, passive assets have witnessed a compounded annual growth (CAGR) of 34.7 per cent in five years, as the assets stood at Rs 3.09 lakh crore in March 2021. Additionally, the share of passive funds in the overall mutual fund industry AUM expanded from 9.8 per cent to 18.6 per cent in the five-year period between 2021 and 2026.

What Is Driving The Passive Investment Boom

According to the Amfi-Crisil Factbook, the rise in passive investment has been driven by strong net inflows and product diversification across multiple segments. In FY 2026, passive funds attracted net inflows of Rs 2.07 lakh crore, which is approximately four times the inflows recorded in FY21, which stood at Rs 1.3 lakh crore.

Among passive investment assets, index funds witnessed the fastest growth as their AUM expanded to Rs 3.07 lakh crore in March 2026 from Rs 19,000 crore in March 2021, growing at  a CAGR of 74.1 per cent. Additionally, the share of index funds in the total passive AUM grew from 6.2 per cent in 2021 to 22.4 per cent in 2026. Index fund systematic investment plan (SIP) AUM also touched Rs 46,000 crore at a five-year CAGR of 72.5 per cent.

Surge In Precious Metal ETFs Demand

According to a study, commodity ETFs (gold and silver) attracted more inflows than equity ETFs for the first time in FY26. The demand for precious metal ETFs was led by rising global macroeconomic uncertainty and sharp rallies in precious metal prices.

Gold ETFs alone recorded net inflows of Rs 69,000 crore in FY26, which is more than double the cumulative inflows of Rs 30,213 crore seen in the previous five fiscals combined.  Silver ETFs also experienced strong demand, with their assets growing 4.2 times compared to March 2025 and contributing nearly 27 per cent of total net inflows within the other ETF segment. Investors increasingly invested in gold and silver mutual funds as preferred hedging tools amid geopolitical volatility.

Who Is Driving The Passive Investment Boom

According to the study, institutional capital remains the key driving force behind the growth in passive investing as corporate investors hold 69.6 per cent of the total passive AUM as of March 2026.

However, individual investor participation has also seen significant expansion. Notably, High Net Worth Individuals (HNIs) increased their share of passive fund AUM from 6.6 per cent in March 2021 to 19.9 per cent in March 2026. On the other hand, retail investor share of passive AuM fell from 13.4 per cent in FY21 to 9.1 per cent in FY26.

Investors Holding On To Passive Investments

According to the study, market participants are increasingly treating index funds and ETFs as long-term portfolio anchors rather than short-term trading tools. The share of passive AUM held for less than one year dropped sharply from 79.8 per cent in March 2021 to 39.6 per cent in March 2026. By contrast, assets held for a period of one to five years expanded from 19.0 per cent to 49.2 per cent, while investments held for more than five years grew from 1.2 per cent to 11.2 per cent.

Even as passive investing has gained in popularity in India, participation remains at an early stage compared to other markets. In the United States, passive funds account for more than 50 per cent of total fund industry assets. Thus, passive investment remains under-penetrated in India. However, Amfi projects that regulatory initiatives like MF Lite can potentially accelerate industry growth by reducing entry barriers for passive-focused asset management companies.