Investors can look at indices such as the Sensex for their passive investment strategy
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Passive investing is a popular concept globally, accounting for over 50%1 of the mutual fund industry assets in developed countries like the US. In India, too the industry has witnessed explosive growth in recent years, driven by investor preference for low-cost, transparent products.
As of mid-2025, passive mutual fund assets under management (AUM) crossed Rs 12 lakh crore2, accounting for nearly 17% of total mutual fund assets, up from just 5% five years ago.
This surge has been powered by multiple factors:
- Institutional participation: Large allocations by the Employee Provident Fund Organisation (EPFO) and government disinvestment programs have provided scale and liquidity.
- Fintech-driven accessibility: Digital platforms have made ETFs and index funds easier to buy and track
- Investor awareness: Growing recognition that beating the market consistently is difficult, and low-cost passive strategies often deliver better long-term outcomes.
Index funds, which usually see a larger participation by retail investors, have seen a staggering 270% growth3 in AUM in the last three years (June 2022–June 2025), reflecting strong adoption. Clearly, passive investing is no longer an experiment, it’s a movement.
What is passive investing?
At its core, passive investing is about matching the market, not beating it. Instead of trying to pick winning stocks or time the market, you invest in a broad market index or basket of securities.
Products like index funds and ETFs make this possible. These funds track benchmarks such as the Sensex or broader indices like BSE 100. When you invest in these funds, your money is spread across all the companies in that index, giving you instant diversification at a fraction of the cost of investing in an active fund.
Benefits of passive investing include:
- Cost-effectiveness - avoids high fees charged by active fund managers.
- Transparency and simplicity - you know exactly what you’re investing in.
- Compounding effect - if held over long periods, passive investing enables investors to benefit from the long-term growth of capital markets.
How can investors invest through this route?
Indian investors can adopt passive investing through index funds and ETFs that track major indices like Sensex. These products replicate the performance of the index, offering low cost, diversification, and simplicity without the need to pick individual stocks or time the market. ETFs trade on exchanges like regular shares, while index funds can be purchased directly from mutual fund houses.
The idea is finding takers, especially among younger, first-time investors who are entering equities through SIPs. With long investment horizons and a preference for low-cost, rules-based products, millennials and Gen Z4 are gravitating toward passive strategies.
Sensex – an able passive investment strategy
Sensex, which completes 40 years of its launch, has been India’s financial barometer over the years. It represents 30 of India’s largest companies by market capitalisation across sectors, making it a strong proxy for the country’s economic growth. These companies are leaders in banking, IT, energy, FMCG, and other critical sectors essentially the backbone of India’s corporate landscape.
Historically, Sensex has delivered robust long-term returns, reflecting India’s resilience and expansion. By investing in Sensex-based ETFs or index funds, investors gain exposure to blue-chip companies and benefit from compounding over time. For those seeking steady wealth creation, passive investing via Sensex offers a disciplined, cost-effective way to ride India’s growth story.
Sources:
1: https://www.ici.org/research/stats/combined_active_index
2: https://www.amfiindia.com/Themes/Theme1/downloads/AMFIMonthlyNote_June2025.pdf
3: https://www.amfiindia.com/Themes/Theme1/downloads/AMFIMonthlyNote_June2025.pdf
4: https://www.business-standard.com/finance/personal-finance/low-fees-high-trust-indians-go-big-on-passive-funds-68-pick-index-funds-125100700192_1.html
Disclaimer: No Business Standard Journalist was involved in creation of this content
Topics : BSE NSE
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First Published: Dec 24 2025 | 8:30 PM IST
