Fifteen people were rescued by local fishermen.
The deceased included six women and four children.
The ill-fated boat was being operated by a private company and was said to be on a trial run.
National Disaster Response Force (NDRF) teams and Krishna district authorities have launched a massive search and rescue operation to trace the missing people.
Tourism Minister Bhuma Akhila Priya ordered an inquiry into the incident and directed her department officials to ascertain whether the boat operator had requisite permissions.
"The boat was overloaded with 38 people and most of them were not provided life jackets. It capsized near a curve as it approached the Pavitra Sangamam point and most of the people were trapped underneath and were killed," an Assistant Commissioner of Police said.
Most of the passengers were said to be members of the Ongole Walkers Club in Prakasam district while some were from Nellore who were on a visit to Vijayawada.
Local fishermen at Ferry swung into action immediately and rescued 15 passengers.
Two teams each comprising 30 NDRF personnel, a 45-member team of the State Disaster Rescue Force (SDRF) and 60 members of the Disaster Response and Fire Services Department have been roped into the rescue operation.
Chief Minister N Chandrababu Naidu, Deputy Chief Minister (Home) N China Rajappa, Opposition leader Y S Jaganmohan Reddy and others expressed grief over the incident.
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