Motilal Oswal Mutual Fund’s passive survey 2025 finds 68% investor adoption of passive funds; 93% of distributors to increase passive allocation in FY25-26
Mumbai, Monday, 6 October, 2025: 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.”
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.
Conclusion:
| Category | 2023 | 2025 |
| Passive fund adoption | 61% invested in at least 1 passive fund | 68% invested in at least 1 passive fund |
| Long-term orientation | 80% investors plan to hold passive funds for over 3 years | 85% investors plan to hold passive funds for over 3 years |
| Over 50% allocation to passive | 12% Passive fund investors | 40% Passive Fund investors |
| ETF usage among passive fund investors | 41% invested in at least 1 ETF | 65% invested in at least 1 ETF |
| Smart beta funds usage among passive fund investors | 13% invested in at least 1 smart beta fund | 61% invested in at least 1 smart beta fund |
| Drivers | Low cost – 57% Simplicity – 56% Performance – 54% | Low cost – 54% Diversification – 46% Simplicity – 46% Performance – 29% |
Source: MOAMC Survey, AMFI data
About Motilal Oswal Asset Management Company:
Motilal Oswal Group possesses a legacy in equities for over 3 decades. Motilal Oswal Asset Management Company Ltd. (MOAMC) is registered with SEBI as the Investment Manager for Motilal Oswal Mutual Fund. It was incorporated on November 14, 2008.
It provides Investment Management and Advisory Services to investors based within and outside India and has Mutual Funds, AIFs and Portfolio Management Services business.
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