ETFs and Index Funds drove a 7.4% q-q surge in passive AUM while equity AUM shrank, says Nomura. Nippon and HDFC are leaning hardest into the shift — a structural read every investor should clock.
While market headlines fixate on Flexi Cap and Small Cap flows, a quieter structural shift is reshaping India’s mutual fund industry: passive money is growing faster than anything else. According to Nomura’s April 5 preview, overall industry AUM grew 0.7% q-q in 4QFY26 despite equity QAAUM declining 0.3% — and the gap was bridged almost entirely by passive schemes. “Other AUM” — Nomura’s bucket for ETFs, Index Funds and Funds of Funds — surged 7.4% q-q across the industry.
For retail investors, the message is twofold: passive is becoming structurally important to AMC earnings, and the fund houses positioning early will likely command the next leg of growth.
The Passive Tilt by AMC
The shift is uneven. Nippon Life AMC’s Other AUM grew 14.4% q-q to ₹2.61 lakh crore — now 36% of its total AUM mix, up from 30.7% just two quarters earlier. HDFC AMC’s Other AUM jumped 15% q-q, while ICICI AMC added 10%. SBI AMC, which already runs a massive ETF franchise via EPFO mandates, holds 32.6% of its AUM in passives.
In contrast, Canara Robeco and UTI AMC are barely participating in this shift — Canara has zero passive AUM, while UTI’s passive share actually slipped 75 bps q-q.
Passive AUM Growth — 4QFY26
| AMC | Other AUM (₹ crore) | q-q Growth | Passive Share of Mix | Mix Shift (q-q) |
|---|---|---|---|---|
| Nippon Life AMC | 2,61,300 | +14.4% | 36.0% | +3.5 pp |
| HDFC AMC | 89,000 | +15.0% | 9.6% | +1.2 pp |
| ICICI AMC | 1,84,500 | +10.0% | 16.7% | +1.1 pp |
| SBI AMC | 4,06,700 | +1.4% | 32.6% | +0.5 pp |
| UTI AMC | 1,76,700 | +1.0% | 45.5% | +1.1 pp |
| ABSL AMC | 37,200 | +4.2% | 8.5% | +0.5 pp |
| Industry | 14,90,100 | +7.4% | 18.3% | +1.1 pp |
Source: AMFI, Nomura research
Why This Matters for Investors
Passive funds carry sharply lower expense ratios than active equity schemes — typically 10-25 bps versus 100-200 bps. That’s good news for the saver but a margin headwind for AMCs. Nomura flags this risk explicitly in its valuation cautions for both HDFC AMC and Nippon AMC, citing “higher than anticipated growth in the low yielding passive segment” as a key downside risk.
The flip side: AMCs that scale passives early can offset margin compression with volume, and Nippon’s outsized passive franchise — already over a third of its book — is a real strategic moat.
The Takeaway
For a portfolio builder, the trend offers a simple insight: large-cap exposure is increasingly a commodity. Index Funds and ETFs tracking Nifty 50 or Nifty Next 50 now deliver near-identical outcomes at a fraction of the cost of active Large Cap funds, which pulled just ₹2,500 crore in March versus passives’ multi-quarter surge.
The move knows where active management is still earning its fee (Mid Cap, Small Cap, Value, Flexi Cap) and where it isn’t.