Passive mutual fund folios surge nearly 18x in five years: Franklin Templeton India

The Indian mutual fund industry’s passive fund folios have expanded nearly 18-fold over the past five years, with assets under management (AUM) rising to Rs 14.20 lakh crore in December 2025 from Rs 10.85 lakh crore a year earlier, marking a 31% year-on-year increase, according to a Franklin Templeton India Mutual Fund note on industry developments.

Overall industry AUM stood at Rs 80.23 lakh crore at the end of December 2025. Passive funds’ share of total AUM increased from 12% in December 2021 to 18% in December 2025, while passive strategies now account for nearly 22% of domestic equity AUM.

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The passive AUM component for debt funds has decreased marginally from 11% in December 2024 to 10% in December 2025. Global Funds AUM has grown by 29 times in 10 years. Equity passives make up nearly 69% of passive fund AUM in December 2025, down from 73% in December 2024.

Flexicap funds emerged as the top-selling equity category over the past 12 months, recording net inflows of Rs 80,979 crore. Smallcap funds attracted Rs 52,321 crore during the period, followed by midcap funds at Rs 49,939 crore and large & midcap funds at Rs 42,176 crore. Most equity fund categories reported positive net sales in December 2025.

In contrast, most debt fund categories saw net outflows in December 2025, largely due to quarter-end effects. Money market funds recorded the highest inflows at Rs 66,994 crore, followed by low-duration funds at Rs 23,339 crore and corporate bond funds at Rs 21,380 crore. Gilt funds, however, witnessed outflows of Rs 5,680 crore during the month.

The Arbitrage funds received the highest gross/ net sales over the last 12 months at Rs 72,318 crore. Multi-asset allocation was the other segment in the hybrid fund universe to receive inflows of Rs 47,057 crore.

54% of international funds AUM comprises the passives, within the domestic universe, 22% of domestic equity AUM comprises the passives.

Mutual funds are moving beyond the Top 15 cities. The share of B15 cities rises from 26% in Sep 2020 to 35% in Sep 2025.

Maharashtra continued to be the largest contributor to the mutual fund industry’s overall assets under management (AUM), followed by New Delhi, Karnataka, and Gujarat. In terms of average AUM (AAUM) growth over the past year, Maharashtra, Rajasthan, Uttar Pradesh, and Telangana recorded strong mutual fund investments.

Mumbai, Delhi, and Bengaluru are among the top three cities contributing to AUM. In terms of AUM addition in the past 12 months, Hyderabad had the highest AUM addition.

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The B30 or Beyond 30 cities’ growth has outpaced the T30 cities’ AUM Growth in the past year. The share of B30 cities’ AUM in Industry AUM has increased from 16% in December 2020 to 18% in December 2025.

Equity Funds account for nearly 55

Equity funds now account for nearly 55% of the mutual fund industry’s total assets under management (AUM). Retail investors hold the largest share of equity fund assets at 44%, exceeding holdings by high net-worth individuals (HNIs) at 42%, while corporates account for 13%. The remaining assets are held by banks, financial institutions, foreign institutional investors, and foreign portfolio investors.

In the debt fund segment, corporates have the largest holding at 69.91%, HNIs 19%, remaining held by Banks, retail, FIIs, and FPIs. At an aggregate level, corporates own 37%, HNIs 33%, retail investors at 26%, and banks, FIs, FIIs, and FPIs hold the remaining.

Specialised Investment Funds (SIFs) AUM

The newly introduced investment avenue in India, SIFs, now has a total AUM of nearly Rs 4892 crore, with a hybrid long-short fund holding nearly 3874 crore.