Passive fund flows taper in May 2025, but equity gains make up

11 Jun 2025 , 10:20 AM

PASSIVE FLOW HIGHLIGHTS FOR MAY 2025

After a sharp revival in passive flows in March and April 2025; they turned relatively tepid in May 2025. Passive fund flows in May 2025 at ₹5,526 Crore was -72.7% lower compared to April 2025. The action in the month was dominated by inflows into domestic equity ETFs and domestic equity index funds. While silver funds saw strong inflows, debt based TMIFs saw outflows in the month of May 2025.

Domestic equity oriented ETFs led the way with inflows of ₹4,227 Crore; followed by domestic equity oriented index funds at ₹3,058 Crore. Silver ETF inflows at ₹854 Crore also put up a good show in the month. Among the categories that saw net outflows in May 2025 were Debt Index Funds -TMIF at ₹(1,593) Crore. Out of the 12 categories of passive funds with flows; 6 categories showed positive net flows and 6 saw net outflows.

HOW EQUITY INDEX FUNDS PERFORMED IN MAY 2025

The table below ranks equity oriented index funds (direct) in India on 3-year returns. We have only considered funds where a 3-year track record is available.

Equity Index Funds Scheme Name	1 Year (%) Returns	2-Year (%) Returns	3-Year (%) Returns
ABSL Nifty Smallcap 50 Index Fund Direct	12.6635	37.9381	30.0138
Axis Nifty Midcap 50 Index Fund Direct	12.3327	32.1371	29.9922
Axis Nifty Smallcap 50 Index Fund Direct	12.3499	37.9701	29.8123
Motilal Oswal Nifty Midcap 150 Index Fund Direct	10.6143	31.2748	28.5188
Aditya Birla Sun Life Nifty Midcap 150 Index Fund Direct	10.2312	31.1914	28.3786
Nippon India Nifty Midcap 150 Index Fund Direct	10.2734	30.9336	28.2629
Navi Nifty Midcap 150 Index Fund Direct	10.2695	30.8668	28.1873
ICICI Prudential Nifty Midcap 150 Index Fund Direct	10.2808	30.8239	28.1530
Motilal Oswal Nifty Smallcap 250 Index Fund Direct	8.9745	31.4921	27.0593
ICICI Prudential Nifty Smallcap 250 Index Fund Direct	8.5815	31.0797	26.9238

Data Source: Morningstar India

The equity index funds overall generated average returns of 5.986% over 1-year, 23.327% CAGR over 2-years, and 19.716% CAGR over 3-years. The top funds in the index category are predominated by mid-cap and small cap index funds, as they drove revival from the trough.

HOW DEBT INDEX FUNDS PERFORMED IN MAY 2025

The table below ranks Debt oriented index funds (direct) in India on 3-year returns. We have only considered funds where a 3-year track record is available.

Debt Index Fund Scheme Name	1 Year (%) Returns	2-Year (%) Returns	3-Year (%) Returns
Kotak Nifty SDL Apr 2032 Top 12 Equal Weight Index Fund	11.9134	9.3316	9.8627
BHARAT Bond ETF FOF – April 2032 Direct Growth	12.0901	9.1094	9.6736
BHARAT Bond FOF April 2031 Direct Growth	11.6925	8.9498	9.4194
BHARAT Bond FOF April 2030 Direct Growth	11.4117	8.7821	9.2454
DSP Nifty SDL Plus G-Sec Jun 2028 30:70 Index Fund	10.3688	8.5539	8.6352
HSBC CRISIL IBX 50:50 Gilt Plus SDL Apr 2028 Index Fund	10.5115	8.6048	8.6063
ICICI Prudential Nifty SDL Sep 2027 Index Fund Direct Growth	10.1298	8.5304	8.5646
Mirae Asset Nifty SDL Jun 2027 Index Fund Direct Growth	9.9077	8.4444	8.5610
Tata Nifty SDL Plus AAA PSU Bond Dec 2027 60: 40 Index FD	10.2987	8.5063	8.5585
Axis CRISIL IBX SDL May 2027 Index Fund Direct Growth	9.8888	8.4350	8.5110

Data Source: Morningstar India

Debt index funds overall generated average returns of 10.110% over 1-year, 8.402% CAGR over 2-years, and 8.353% CAGR over 3-years. The top funds in the index category are dominated by longer tenure bond funds, gaining from the fall in bond yields amidst a dovish stance by the RBI. Debt fund performance was robust in last one year due to conducive interest rate environment.

PASSIVE FUND FOLIO GROWTH: MAY 2025 OVER MAY 2024

Despite overall folio growth being under pressure, one must admit that the folio growth in passive funds continues to be robust.

Passive Mutual Fund Schemes (Folios)	Folios May-25 (in Numbers)	Folios May-24 (in Numbers)	Growth (%)
Silver ETF	8,37,703	2,48,738	236.78%
Equity oriented ETFs (International)	9,26,514	4,42,956	109.17%
Equity oriented Index Funds (Domestic)	1,27,02,493	78,87,156	61.05%
Equity oriented ETFs (Domestic)	1,62,63,745	1,16,39,874	39.72%
Gold ETF	73,68,808	53,20,483	38.50%
Other Index Funds	99,201	74,272	33.56%
Income/Debt Oriented Index Funds (TMIF)	1,86,256	1,45,510	28.00%
Income/Debt Oriented ETFs	24,65,368	21,46,074	14.88%
FOFs investing overseas in Active Funds	7,75,767	7,50,436	3.38%
Equity oriented Index Funds (International)	2,37,450	2,41,750	-1.78%
FOFs investing overseas in Passive Funds	6,01,469	7,30,456	-17.66%
Income/Debt Oriented Index Funds (Ex-TMIF)	9,411	15,021	-37.35%
Total of Passive Funds	4,24,74,185	2,96,42,726	43.29%

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

Here are some key inferences from the yoy growth in passive folios.

• Passive fund folios yoy growth in May 2025 stood at 43.29%; compared to 45.94% in April, 48.31% in March, 50.15% in February, and 50.92% in January2025. While there has been a gradual tapering of folio growth of passive funds, they have still done better than active funds on the folio front. Total folios of passive funds stood at 424.74 Lakhs; compared to 418.98 Lakhs as of April, 414.72 Lakhs in March, 409.23 Lakhs in February, and 398.62 Lakhs in January 2025. Incremental growth is slowing.
• What about the leaders? Again, silver ETFs led folio growth at 236.78%, followed by equity oriented ETFs (International) at 109.17% and equity oriented Domestic Index Funds at 61.05%. A total of 9 out of 12 categories saw folio expansion, with ex-TMIF debt oriented funds, FOFs investing in overseas passive funds, and International equity index funds witnessing folio contraction.

Folio growth stayed under 50% for the third month in a row, but that could improve once the lure of passive investing comes back.

PASSIVE FUNDS AUM: MAY 2025 OVER MAY 2024

Despite the turmoil, the growth rate of passive funds AUM has been better in May 2025, largely due to positive stock market effect.

Passive Mutual Fund Schemes	AUM May-25 (₹ Crore)	AUM May-24 (₹ Crore)	Growth (%)
Silver ETF	16,866	7,018	140.33%
Gold ETF	62,453	31,689	97.08%
Equity oriented Index Funds (Domestic)	1,82,045	1,12,754	61.45%
Equity oriented ETFs (International)	13,977	11,162	25.22%
Equity oriented ETFs (Domestic)	7,05,131	5,81,164	21.33%
Equity oriented Index Funds (International)	5,272	4,527	16.47%
FOFs investing overseas in Active Funds	18,916	17,029	11.08%
Income/Debt Oriented Index Funds (TMIF)	1,03,778	94,259	10.10%
Other Index Funds	3,693	3,375	9.44%
FOFs investing overseas in Passive Funds	8,098	8,001	1.22%
Income/Debt Oriented ETFs	97,992	97,982	0.01%
Income/Debt Oriented Index Funds (Ex-TMIF)	6,023	14,796	-59.29%
Total of Passive Funds	12,24,244	9,83,756	24.45%

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

Here are some key inferences we can draw from the above table.

• Passive fund AUM yoy growth in May 2025 improved 24.45%; compared to 23.80% in April, 22.72% in March, 18.78% in February, and 26.63% in January 2025. While the growth in AUM is still much lower compared to year 2024, the last 3 months have seen a steady improvement in AUM, which can be attributed to equity value accretion.
• What about leaders and laggards? Silver ETFs led the growth at 140.33%, followed by Gold ETFs at 97.08%, and equity oriented domestic index funds at 61.45%. A total of 11 out of 12 categories saw AUM expansion, with only ex-TMIF debt oriented index funds witnessing AUM contraction.

While the folio growth of passive funds is faltering, the AUM growth is still robust; thanks to the revival in the market. However, the big-bang passive narrative is still missing!