Index Funds, of late, have seen a significant surge with retail investors actively buying them. During the post-Covid period, the number of retail investment accounts in index funds observed a substantial 12-fold increase, as per an analysis conducted by Zerodha Fund House. The total number of retail folios in index funds surged from 0.5 million in March 2020 to 5.9 million in December 2023. Data provided by the Association of Mutual Funds in India (Amfi) indicates that the index fund retail accounts or folios further rose to 7.2 million by March 2024.
The trend of notable growth in the Assets under Management (AUM) of index funds, covering both equity and debt segments, is further confirmed by the remarkable surge in the AUM of index funds. Across all the other mutual fund categories, Index Funds witnessed the highest AUM growth (in %) over the past 3 years. Over the period from March 2020 to March 2024, the AUM of index funds has shown a substantial 25-fold increase, rising from around Rs 8,000 crore in March 2020 to approximately Rs 2,13,500 crore by March 2024.
"The increasing contribution of folios in the MF industry is incrementally being contributed by index funds. Nearly 11% of new folios last financial year came from index funds..Retail investors increasingly prefer to have simple & transparent exposures with passive products like index funds in their portfolios and this trend is heartening to see," said Vishal Jain, CEO, Zerodha Fund House.
Index funds are designed to track a specific market index, such as the Nifty50 index. In the current market scenario, index funds that track the Nifty50 index dominate the index fund assets under management (AUM) landscape, amounting to Rs 52,211 crore. Apart from Nifty50 index funds, Sensex and Nifty Next 50 index funds are also favored investment options among investors.
In response to the increasing demand and trust from investors in index funds, numerous mutual fund companies have introduced equity and debt index funds over the past four years. The count of index funds has surged from 44 in March 2021 to 207 in March 2024, reflecting a remarkable growth rate of 370%. A recent study highlighted that as of 31st March 2024, there are 120 equity index funds and 87 debt index funds available in the market.
In response to the increasing demand and trust from investors in index funds, numerous mutual fund companies have introduced equity and debt index funds over the past four years. The count of index funds has surged from 44 in March 2021 to 207 in March 2024, reflecting a remarkable growth rate of 370%. The study highlighted that as of 31st March 2024, there are 120 equity index funds and 87 debt index funds available in the market.
"The dominance of the Nifty 50 index, comprising 70.7% of total AUM at Rs 52,000 crore, reflects a clear preference for large-cap stocks. Meanwhile, the Nifty Next 50, with 14.6% 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.
Debt funds were the primary drivers of the growth in AUM for index funds before April 2023. Specifically, the AUM of debt index funds, which was insignificant until March 2021, experienced a significant surge over the subsequent two years. As of April 2023, the AUM of debt index funds has stabilised at approximately Rs 1 lakh crore.
Top Index Funds
Motilal Oswal Nasdaq 100 FOF Direct - Growth
UTI Nifty 50 Index Fund Direct-Growth
Bandhan Nifty 50 Index Fund Direct Plan-Growth
ICICI Prudential Nifty 50 Index Direct Plan-Growth
SBI Nifty Index Direct Plan-Growth
HDFC Index Fund Nifty 50 Plan Direct -Growth