Index Funds Emerge As Fastest Growing Category In SIP AUM: Zerodha Fund House

Investing in mutual funds is gaining traction among investors. Systematic Investment Plans (SIP) provide a simple way of investing money. A new study by Zerodha Fund House, shows that over the past year index funds became the fastest-growing category in Systematic Investment Plan (SIP) Assets Under Management (AUM). Additionally, the number of live SIP accounts increased by about 80 per cent over the same period.

An index fund is a type of mutual fund or exchange-traded fund (ETF) that tracks a specific market index with the aim of replicating its performance.

The study also found that while the average ticket size of index funds is similar to that of the mutual fund industry, the growth rate for index funds stood at 14 per cent compared to 8 per cent for the industry.

The study claimed that individual investors held over 60 per cent of all index fund AUM as of September 30, 2024. The remaining portion of the AUM of index funds was held by corporates and other institutions.

Zerodha Fund House also found in its study that the contribution of the index fund category to the mutual fund industry’s folios has grown 12 times in the past five years. The study claimed that in September 2019 index fund folios made up 0.43 per cent of the total industry folios, currently the folios represent around 5 per cent.

Vishal Jain the Chief Executive Officer (CEO) of Zerodha Fund House said that index funds are positioned to grow. He added that index funds are likely to become a go-to investment for retail investors who want exposure to the Indian economy. 

”As awareness and accessibility continue to grow, index funds are well-positioned to become a go-to investment avenue for retail investors seeking to take exposure to the Indian economy in a simple, cost-effective manner,” Jain said.