While there has been a raging debate on passive and active investment model, passive funds, both short- and long-term, have once again beaten actively managed mutual funds (MFs).
In the last one year ended December 15, 86 per cent of large-cap funds have underperformed Nifty by an average of 2.6 per cent. In the last five years, this figure rose to 92 per cent by a margin of 1.6 per cent.
Even in the mid-cap category, 56 per cent of mid-cap funds underperformed the Nifty Midcap 150 index. This figure becomes obviously higher when index is compared against regular plan of active funds which are at much higher total expense ratio, revealed a study by Mirae Asset study on passive funds.
Building momentum
The passive investment market in India has built up phenomenal momentum over the past five years. The assets under management (AUM) of passive funds in India now stands at ₹6.46-lakh crore, registering over seven times increase over the past five years, said the study.
The number of passive schemes now stand at 294, with 157 ETFs managing assets worth ₹5.22-lakh crore and 137 index funds grossing total assets worth ₹1.24-lakh crore.
Passive funds have seen an inflow of ₹1.7-lakh crore in the past one year and the AUM has almost increased 53 per cent to over ₹6.46-lakh crore as of November against ₹4.22-lakh crore last November.
In the last one year, 79 new index funds and 41 new ETFs had collected ₹17,841 crore through new fund offers.
Apart from the benchmark Nifty and Sensex-based funds, which saw an inflow of ₹45,682 crore and ₹26,663 crore, target maturity funds amassed maximum inflows of ₹80,042 crore. Commodity funds, on the other hand, gathered inflows worth ₹2,548 crore in the past one year.
Siddharth Srivastava, Head (ETF Products), Mirae Asset Investment Managers (India), said with the increased influence of passive investments in the Indian market and growing investor interest, the trend of higher inflow will continue.
Inflationary concerns
Overall, it has been an interesting year for the stock market with key indices — Nifty and Sensex — clocking their all-time highs early December even while global markets have bled due to the war between Russia and Ukraine leading to rise in energy prices, pandemic-induced global supply chain challenges and decadal-high inflation.
While concerns on inflation made RBI tighten the policy with reasonable speed, the inflation in India was not as out of range of central bank target as it was in the US, UK or Europe, he said.