Indian retail investors behind 12 times surge in index funds folios in last 4 years

Mumbai: As more and more Indians prefer to have simple and transparent exposures in mutual funds, the total retail folios in index funds increased by nearly 12 times from 4.95 lakh in March 2020 to 59.37 lakh in December 2023, a study by Zerodha Fund House showed on Friday.

The Assets under management (AUM) of index funds has recorded a staggering increase of 25 times -- from about Rs 8,000 crore in March 2020 to about Rs 2,13,500 crore in March this year.

Notably, debt index funds had seen a sizable growth from negligible to no AUM till March 2021 but scaled up to almost surpass the milestone AUM of Rs 1.1 lakh crore in March, according to the study.

“Nearly 11 per cent of new folios last financial year came from index funds. It is only the beginning of a growing trend and Zerodha Fund House is proud to play its part in it,” said Vishal Jain, CEO, Zerodha Fund House.

The total number of index funds has increased from 44 in March 2021 to 207 in March 2024, accounting for an absolute growth of 370 per cent.

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

The index funds category assets were at a record high of Rs 2.43 lakh crore as of June 2024 and have seen a surge of nearly 900 per cent in assets in the past three years.

Across all the other mutual fund categories, Index Funds witnessed the highest AUM growth over the past 3 years.

The dominance of the Nifty 50 index, comprising 70.7 per cent of total AUM at Rs 52,000 crore, reflects a clear preference for large-cap stocks.

Meanwhile, the Nifty Next 50, with 14.6 per cent of total AUM at Rs 10,000 crore, and smaller allocations to mid and small-cap stocks, suggest a balanced approach to risk and return among investors, the study said.