Reporting from India, Ketaan Ram Kataria writes that ETFs in India have witnessed exponential growth over the past five years, emerging as a major force in the mutual fund industry, according to a recent report by Zerodha Fund House.
The report found that in the five years ending March 2025, the total assets under management (AUM) of ETFs increased 5.5 times to INR8.38 lakh crore. This represents a notable increase from INR1.52 lakh crore in March 2020.
The share of ETFs in the overall mutual fund industry AUM has nearly doubled during this period, climbing from 7 per cent in March 2020 to 13 per cent in March 2025. The Indian mutual fund industry, with a total AUM of INR65.74 lakh crore, has seen ETFs emerge as a strong alternative to actively managed funds, largely due to their low cost, liquidity, and transparency.
The remarkable expansion of ETFs has been fuelled by multiple factors, most notably the entry of new fund houses that focus exclusively on passive investment strategies. These firms are tapping into a growing appetite for simplified and cost-efficient investment products among retail investors.
Retail participation in ETFs has also seen an unprecedented rise. Retail assets in ETFs more than tripled from INR 5,335 crore in March 2020 to INR 17,800 crore in March 2025. At the same time, the number of retail investor folios jumped nearly tenfold, from 23.22 lakh to a staggering 2.63 crore. This trend underscores a growing awareness and adoption of passive investing strategies among Indian investors.
Trading volumes further reflect this surge in interest. The volume of ETF trades in India grew seven times over the past five years, rising from INR51,101 crore in FY20 to INR3.83 lakh crore in FY25. Notably, the trading volume more than doubled in just the last year, signalling rising liquidity and increased investor engagement.
Equity-oriented ETFs continue to dominate the market, accounting for around 80 per cent of the total ETF AUM. This consistent dominance indicates a strong investor preference for equity exposure through ETFs, as they offer an efficient means to participate in the stock market with lower management fees and broader diversification.
Vishal Jain, CEO of Zerodha Fund House, says: “This study reflects a new era for Indian ETFs, characterised by surging retail participation and expanding product diversity. As a result, we are seeing stronger volumes and increased investor confidence in passive investing.”
The report notes that volume more than doubled in the past year, indicating increased liquidity and heightened investor interest.
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