In this article, we trace the growth of passive fund AUM in India over the last 10 years. Since 2015, the EPFO is a major investor in the Nifty and Sensex ETFs run by SBI and UTI. So we shall exclude these funds from the study.
The total AUM of ETFs and Index funds (excluding gold ETFs) was about Rs. 1848 Crores in March 2012. This has increased to about Rs. 73342 Crores in Jan 2022. An increase of 3868%.
This increase has two components: the increase in inflow and capital gains. We shall represent the capital gain by the absolute change of Nifty Bees ETF – 258%. This means the inflow contribution to the NAV increase is 3868% minus 258% = 3610% (approximately). In other words, about 93% of the AUM increase is due to inflows.
While this is impressive, we must hasten to point out that the total AUM in passive funds is quite small. In March 2012, the total passive AUM was only 2% of the total AUM of market cap funds (large, large and mid, mid, small cap etc). As of Jan 2022, this has increased to 9%. Also see: What percentage of MF AUM is in passive funds? and Which mutual funds do retail and high net worth investors choose?
EPF AUM is a big chunk. If this was included, the 3868% would have become 16683% and the 9% mentioned above would be 36%.
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Next, we look at the year on year increase in AUM, chance in NAV and contribution from inflows.
| Date | AUM Change | NAV Change | Inflow contribution |
| Feb-13 | –8.33% | 7% | –15.33% |
| Feb-14 | -25.45% | 12% | -37.05% |
| Feb-15 | 137.82% | 42% | 95.74% |
| Feb-16 | 58.33% | -20% | 78.58% |
| Feb-17 | 103.18% | 28% | 74.93% |
| Feb-18 | 21.06% | 20% | 1.45% |
| Feb-19 | 45.69% | 4% | 41.39% |
| Feb-20 | 62.75% | 5% | 57.74% |
| Feb-21 | 54.58% | 31% | 23.75% |
| Jan-22 | 71.08% | 21% | 50.57% |
With the exception of Feb 2018, the inflow has been robust since Feb 2015. The big change of 96% increase in inflow is quite interesting.
These funds enjoyed a 100+ Crores AUM increase from Feb 2014 to Feb 2015.
- Nippon India ETF Nifty BeES (2X increase)
- Kotak Banking ETF (new)
- HDFC Index Fund-NIFTY 50 Plan(G) (3.8X increase)
- Franklin India Index Fund-NSE Nifty(G) (2X increase)
- Motilal Oswal Midcap 100 ETF (almost 5X increase)
- ICICI Pru Nifty ETF (18X increase)
During this time, Nifty Bees NAV moved up 42%. So the bull market possibly triggered the interest in demat accounts and ETFs.
Looking at the year on year inflows, it is easy to appreciate why AMCs has a long lineup of passive funds (plus they can’t launch more funds in the same category except for thematic funds!)
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