Motilal Oswal Mutual Fund (MOMF) has released the third edition of its Passive Survey 2025. The survey, conducted in August-September 2025, captures insights through the lens of 3000+ investors and 120+ distributors (including MF distributors, RIAs, and wealth managers) across India.

The passive industry Assets Under Management (‘AUM’) stood at ₹12.2 lakh Crs, a 6.4-fold increase in six years (36% CAGR), from ₹1.91 lakh Crs in 2019. In just over two years since March 2023, AUM has grown 1.7 times (~26% CAGR), underscoring the accelerating adoption.

The investor survey findings shows that passive funds are becoming mainstream in India. 76% of surveyed mutual fund investors are aware of Index Funds or ETFs in 2025. 68% investors have invested in at least one passive fund in 2025, up from ~61% adoption in 2023. However, even with this adoption growth, one-third of investors remain outside, citing higher confidence in active funds or unfamiliarity with passive products.

Investors cited low costs (54%), diversification (46%), simplicity and transparency (46%), and performance (29%) as key factors when selecting passive funds.

The distributor survey reflects similar traction with 93% of surveyed distributors understanding passive funds of which ~46% demonstrate deep knowledge and ~70% include them in their clients’ portfolios. Most distributors (93%) plan to further increase passive allocation by at least 5% in FY25-26. At present, 70% of their clients hold fewer than three passive funds, indicating that passive exposure plays a satellite role in portfolios.

When choosing passive funds, investors emphasized (54%), diversification (46%), simplicity and transparency (46%), and performance (29%) when choosing passive funds, distributors added them into their product baskets for diversification (62%), low risk (34%), and ease of understanding (28%).

Commenting on the findings, Pratik Oswal, Chief of Passive Business at Motilal Oswal AMC, said, “In India, passive strategies have experienced significant growth in recent years, moving from being a niche allocation in only a few portfolios to being embraced by a broader investor base. Awareness is no longer limited to broad-based index solutions as investors are increasingly accepting factor-based funds and innovative passive strategies. With growing interest, passive investing is emerging as an important approach for investors seeking a disciplined way to participate in long-term wealth creation.”

Also Read: Zerodha Launches Multi-Asset Passive Fund FoF: Key Details

Other Key Highlights of the Passive Survey 2025

Investors

Investment Objectives & Behaviour: For Indian investors, the primary objective of investing is financial independence (61%), followed by retirement planning (49%) and portfolio diversification (31%). A strong long-term orientation is evident, with 85% of investors holding their investments for more than three years, while only 13% stay invested for one to three years and a mere 2% for less than a year. In terms of investment style, 57% prefer a combination of SIPs and lumpsums, compared to 26% rely solely only on SIPs and 17% prefer lumpsum investing.

Information Sources and Channels: Financial websites remain the primary source of information for 52% of investors, followed by newspapers (38%), social media (29%) and TV (18%). Digital modes also dominate how investors transact, with 60% preferring online apps and 39% mutual fund websites, while financial advisors (15%) and banking partners (5%).

Passive Fund Adoption: Among passive investors, more than half (57%) currently hold one to three passive funds, 26% hold three to five, and about 17% own more than five funds. In terms of product preferences, 49% invest in both index funds and ETFs, 34% only in index funds, and 16% only in ETFs. Broad-based equity is the anchor exposure—79% of index fund investors and 62% of ETF investors allocate here. Commodities are the next preference (37% for index funds, 61% for ETFs), followed by sectoral or thematic funds (34% for index funds, 33% for ETFs), and international equity (26% and 32% respectively).

Smart Beta Strategies: Among Smart Beta approaches, momentum is the most popular (40%), closely followed by quality (37%) and value (35%), indicating investors’ appetite for rule-based strategies beyond traditional indices.

Distributors

Information Sources: Distributors primarily rely on AMC communications—through websites, emails, and WhatsApp (73%), followed closely by online platforms (71%). Traditional media such as television and newspapers account for 34%, while social media (23%) and friends and family (10%) play a smaller role.

Investor Demand Trends: More than half of distributors (54%) observe that millennial investors are showing the strongest interest in passive funds, with Gen X following behind. This indicates that these demographics are driving adoption and shaping the future growth of passive investing.

Product Preferences: When it comes to passive products, 49% of distributors prefer offering both index funds and ETFs, 35% focus primarily on index funds, and 16% lean toward ETFs. Around 79% predominantly recommend broad-based index funds and ETFs as core allocations for their clients, while ~48% incorporate commodities such as gold and silver to diversify beyond equities.

Evaluation Metrics: In assessing passive funds, tracking error remains the most important criterion for 68% of distributors, followed closely by expense ratio, highlighting the priority given to accurate index replication and cost efficiency when selecting products for clients.