Passive flows; the big story of mutual fund flows in December 2025

30 Jan 2026 , 12:55 PM

ALL THAT GLITTERS IS GOLD, OR PROBABLY SILVER

Just about 4 months back, the debate was whether investors had lost interest in passive funds and shifted to active funds big-time. A lot has changed in the last 4 months. In fact, in December, net inflows into passive funds stood at ₹26,723 Crore, which is one of the best inflows into passive funds we have seen in a long time.  Not surprisingly, the flows into passive funds were once again led by the gold ETFs and silver ETFs.

In short, all that glitters in mutual funds appears to be either gold or silver. That is hardly surprising. In the last 1 year, gold rallied around 70%, while silver has rallied close to 180%. That is the kind of stuff that dreams are made of. In fact, gold and silver had their best yearly returns in 2025 in the last 46 years. However, we will not delve in detail into the returns generated by gold ETFs and silver ETFs, because that normally mirrors the returns on the underlying metal. The focus will be on the passive equity themes that outperformed.

SHORT TERM PERFORMANCE OF PASSIVE EQUITY FUNDS IN INDIA

We are looking at short term performance of passive equity funds in India. We have taken the average of 1-month, 3-months, and 6-months returns and ranked the funds on the average of these three returns. That is a good measure of short-term momentum.

Name of Fund	1 Month	3 Months	6 Months	Average
SBI BSE PSU BANK INDEX FUND	9.85	17.03	23.56	16.81
ICICI Pru Nifty200 Value 30 Index Fund	7.45	11.33	14.14	10.97
MOSL BSE Enhanced Value Index Fund	5.94	10.05	11.50	9.16
MOSL Nifty Mid-Small FS Index Fund	4.44	10.04	12.38	8.96
Bandhan Nifty 500 Value 50 Index Fund	6.36	8.31	11.18	8.62
UTI Nifty 500 Value 50 Index Fund	6.36	8.33	11.16	8.62
Axis Nifty IT Index Fund	3.11	11.20	5.17	6.50
Nippon India Nifty IT Index Fund	3.14	11.14	5.15	6.48
SBI Nifty IT Index Fund	3.11	11.16	5.13	6.47
Bandhan Nifty IT Index Fund	3.11	11.15	5.11	6.46
ICICI Prudential Nifty IT Index Fund	3.10	11.16	5.10	6.45
DSP Nifty IT Index Fund	3.10	11.11	5.08	6.43
Navi Nifty IT Index Fund	3.09	11.04	5.07	6.40
Kotak BSE PSU Index Fund	6.32	5.27	6.36	5.98
Kotak Nifty Commodities Index Fund	4.57	4.39	7.56	5.51
MOSL Nifty Capital Market Index Fund	5.36	3.16	3.41	3.98
ICICI Pru Nifty Bank Index Fund	1.77	4.60	5.34	3.90
MOSL Nifty Bank Index Fund	1.76	4.58	5.36	3.90
Tata Nifty Capital Markets Index Fund	5.35	3.09	3.26	3.90
Axis Nifty Bank Index Fund	1.77	4.59	5.33	3.90
Data Source: AMFI

What do we read from the above table. There are broadly 3 narratives that emerge from the top performing passive equity funds in the short term. The first narrative is BFSI, which is the main theme and PSU Banks the sub-theme. Overall, the domestic preponderance of BFSI and its sync with the consumption story has kept this sector in limelight. Eight of the top twenty belong to the BFSI theme.

The second narrative is value. Clearly, in a tough month it is value that trumps momentum as a theme. That was evident in the passive equity fund rankings. It took different colours, but the underlying them was value, which accounted for four out of the top-20. The third and final theme was the rebound in IT services, where hopes of a good Q3 and sustained AI revenues have helped. In fact, seven out of top-20 represent the IT theme.

What is the signal for investors: Some of the themes like rebound in IT may not replicate in future so investors cannot look at that as a template for future investments. However, BFSI seems to be the big theme for investors in the coming year too. With robust NIMs, solid loan growth, and focus on India story; BFSI could be the big theme for 2026. Then, there is the value theme, which could again predominant momentum. This is the kind of market where quality stock with low P/Es could really come into their own. Investors must position their portfolio strategy accordingly.

HOW PASSIVE FOLIOS GREW BETWEEN DEC-24 AND DEC-25

Passive funds folio growth slackened in recent months, but only marginally.

Passive Mutual Fund Schemes (Folios)	Folios Dec-25 (in Numbers)	Folios Dec-24 (in Numbers)	Growth (%)
Silver ETF	32,12,453	6,21,639	416.77%
Equity oriented ETFs (International)	11,13,697	6,85,782	62.40%
Gold ETF	1,02,25,561	64,05,088	59.65%
FOFs investing overseas in Active Funds	10,91,883	7,32,413	49.08%
Debt Oriented Index Funds (Ex-TMIF)	25,833	18,470	39.86%
Equity oriented Index Funds (Domestic)	1,38,55,857	1,20,10,532	15.36%
Equity oriented ETFs (Domestic)	1,70,67,305	1,49,47,918	14.18%
Other Index Funds	1,03,428	92,034	12.38%
Debt Oriented ETFs	25,76,197	23,41,427	10.03%
Debt Oriented Index Funds (TMIF)	1,72,336	1,69,843	1.47%
Equity oriented Index Funds (International)	2,43,637	2,54,703	-4.34%
FOFs investing overseas in Passive Funds	5,46,771	6,39,439	-14.49%
Total (Passive Funds)	5,02,34,958	3,89,19,288	29.07%

Data Source: AMFI (TMIF is target maturity index funds)

What are the key takeaways from the folio growth of passive funds in last 1 year?

• Total passive fund folios as of end December 2025 stood at 502.35 Lakhs; which is 29.07% higher on a yoy basis and 2.81% higher sequentially. Which funds led the growth in passive folios? No prices for guessing, but Silver ETFs grew folios more than 5-fold in the last 1 year. Other big positive contributors were International Equity ETFs, Gold ETFs, and FOFs investing in active funds.
• What does this signal to investors? Clearly, the retail appetite for gold ETFs and silver ETFs appears to be huge, as evidenced by the folio accretion. However, gold and silver have rarely repeated their stellar performance for two years in a row, so investors must be cautious about extrapolating this experience. However, the volatility in the market does make a case for passive equity funds for lower costs and gold / silver ETFs for a multi-asset hedge to your portfolios.

Let us finally look at how the AUM of passive funds shifted in December 2025.

HOW PASSIVE AUM GREW BETWEEN DEC-24 AND DEC-25

Passive fund AUM growth in December 2025 was once again led by silver ETFs and gold ETFs, as these precious metals gained from the price rally.

Passive Mutual Fund Schemes	AUM Dec-25 (₹ Crore)	AUM Dec-24 (₹ Crore)	Growth (%)
Silver ETF	72,652.32	12,317.45	489.83%
Gold ETF	1,27,896.39	44,595.60	186.79%
FOFs investing overseas in Active Funds	27,570.36	17,943.96	53.65%
Equity oriented Index Funds (Domestic)	2,10,539.28	1,59,156.38	32.28%
Equity oriented ETFs (International)	17,236.36	13,541.19	27.29%
Equity oriented Index Funds (International)	6,723.00	5,498.22	22.28%
Equity oriented ETFs (Domestic)	7,77,500.74	6,44,370.67	20.66%
Other Index Funds	3,876.74	3,490.31	11.07%
Debt Oriented Index Funds (TMIF)	97,941.40	93,320.93	4.95%
Debt Oriented ETFs	99,114.55	95,145.89	4.17%
FOFs investing overseas in Passive Funds	9,014.16	8,668.84	3.98%
Debt Oriented Index Funds (Ex-TMIF)	6,740.98	13,611.36	-50.48%
Total (Passive Funds)	14,56,806.27	11,11,660.80	31.05%

Data Source: AMFI (TMIF is target maturity index funds)

Here are some key inferences from the above table.

• Passive fund AUM at ₹14.57 Trillion is 31.1% higher on a yoy basis. For the year, the overall passive fund AUM increased by ₹3.45 Trillion. Out of this accretion in AUM, about 39% was contributed by domestic equity index ETFs; 24% by gold ETFs, 17% by silver ETFs, and 15% from domestic equity index funds. That was bulk of the growth.
• What does this signal to investors? In year 2026, passive funds must be an integral part of the portfolios of small and medium sized investors too. After all, gold and silver add value due to their low correlation with equities and debt. Also, in a volatile market, the passive story allows investors to pick up very specific themes of passive and Beta Plus funds. That can add value in a complex year for investors.

 

LLM Summary Passive investing has seen strong traction in the month of December, although it is still largely driven by gold and silver ETFs and less by other products. Globally, bulk of the retail money goes into passive funds because they are simple, customized, and also low on costs. In active investing, it is not only difficult for the fund manager to find the right stocks, but also tough for investors to find such funds that will beat the index. Retail investors must look at making index based investing an essential part of their overall strategy, rather than being opportunistic. The fabulous returns on gold and silver ETFs will be tough to repeat and retail investors would do well to remember that!