At the Cafemutual Passives Conference (CPC) 2026, Prem Khatri, Founder and CEO, Cafemutual set the tone for the day with a strong message for the mutual fund industry: passive investing is no longer a side conversation but a structural shift that distributors and fund houses can no longer ignore.
Speaking in the inaugural session titled Operation Passive: The Passive Disruption: Adapt or be Left Behind, Khatri traced the evolution of passive investing in India and highlighted how the category has moved from being an experimental space to becoming a major force within the mutual fund industry.
He pointed out that India was among the early adopters of ETFs. While the first passive fund in the country was launched nearly three decades ago, the first ETF was introduced in 2000 by Benchmark Mutual Fund, at a time when ETFs were still relatively unknown even in developed markets like the US.
Despite the early start, the real momentum in passive investing has emerged only in the last six years. Passive AUM has grown from Rs.1.60 lakh crore to more than Rs.14.60 lakh crore, registering nearly nine-fold growth. According to Khatri, passive funds now account for around 18% of the mutual fund industry’s total AUM.
Breaking down the category, he said equity ETFs remain the largest segment, with nearly half of the category driven by EPFO investments. Debt ETFs, gold ETFs and index funds have also seen strong traction. The industry today has nearly 740 passive products, including index funds, ETFs and fund of funds.
However, Khatri stressed that AUM alone does not fully capture the growth story of passive investing. Instead, he highlighted folio growth as the real indicator of investor acceptance.
Passive funds now account for nearly 5.7 crore folios, which translates into roughly 21% of the industry’s total folios. Gold ETFs and index funds, in particular, have witnessed strong retail participation, driven largely by SIP investments.
According to him, investors are increasingly drawn towards passive investing because of its simplicity, low cost and transparency.
“Investors know what they are signing up for. There is predictability in returns because passive funds are designed to mirror markets rather than attempt to beat them,” he said.
Khatri also explained that the rise of SIP investing has naturally supported the growth of index funds, as passive products fit well into long-term, disciplined investing strategies.
At the same time, he acknowledged that active funds continue to dominate investor mindshare because of the promise of alpha generation. According to him, active fund managers and distributors have successfully built compelling narratives around outperforming the market, especially in segments like mid and small caps where inefficiencies still exist.
To watch the full session and gain deeper insights into the passive investing space, click on the link below: https://youtu.be/WSdsxqMj2fM?si=jrTO_OVGkTdVgbcL
Like what you are reading?
development, success stories and industry updates.
Don’t worry … it’s FREE!