Indian mutual fund investors are increasingly putting their money behind equity and passive products, signalling a major shift in how portfolios are being built.
A new study by ICRA Analytics shows that while the mutual fund industry has grown sharply over the past five years, equity and passive funds have grown much faster than debt-oriented products.
The industry’s total AUM jumped 143% from Rs 35.32 lakh crore in July 2021 to Rs 85.76 lakh crore in July 2026.
But the real story lies beneath this headline growth.
Equity AUM more than triples
Equity has emerged as the biggest growth engine.
Equity AUM surged 224% from Rs 11.87 lakh crore to Rs 38.40 lakh crore during the five-year period.
Debt, on the other hand, grew only 27%, from Rs 15.28 lakh crore to Rs 19.46 lakh crore.
This widening gap suggests that investors are increasingly comfortable taking market-linked exposure for long-term wealth creation.
Passive funds grow 3.2 times
Passive investing has seen an even bigger jump.
The combined AUM of ETFs and index funds rose from Rs 3.57 lakh crore in July 2021 to Rs 15.15 lakh crore in July 2026, a staggering 324% increase.
Index funds recorded the sharpest growth. Their AUM jumped from just Rs 26,000 crore to Rs 3.43 lakh crore, translating into a 1,204% increase.
ETF AUM also climbed sharply from Rs 3.31 lakh crore to Rs 11.71 lakh crore.
For investors, the attraction is clear: market-linked exposure, diversification and relatively lower costs.
Folios tell an even bigger story
This is not just an AUM story.
The number of mutual fund folios has more than doubled, rising from 10.55 crore in July 2021 to 28.09 crore in July 2026.
Equity folios increased from 7.18 crore to 18.75 crore, while passive fund folios jumped more than five times from 92 lakh to 5.54 crore.
Debt folios, meanwhile, barely moved, increasing from 81 lakh to 95 lakh.
The sharp rise in equity and passive folios indicates that the change is being driven by a wider investor base, rather than simply by market appreciation.
In a press release, Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, said, “The five-year trend indicates that investor allocation within mutual funds is undergoing a meaningful structural change. Equity continues to remain the primary growth engine, while passive products have steadily gained relevance as investors increasingly seek transparent, cost efficient and diversified market exposure. The sharp rise in both AUM and folios, particularly across equity and passive categories, suggests that this trend is supported by a broadening investor base and is not simply a function of short-term market movements.”
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