#IndiaETFAUMGrows5xin5Years #ETF #IndiaETF #ZerodhaFundHouseReport #Zerodha
Mumbai: Exchange-Traded Funds (ETFs) have emerged as a transformative force in India’s mutual fund landscape, witnessing explosive growth in both assets and investor participation over the past five years. According to a recent report published by Zerodha Fund House, the total Assets Under Management (AUM) in ETFs surged from ₹1.52 lakh crore in March 2020 to an impressive ₹8.38 lakh crore by March 2025—a growth of more than five times.
This exponential rise has pushed ETFs to now account for approximately 13% of the Indian mutual fund industry’s total AUM, which stood at ₹65.74 lakh crore as of March 2025. In contrast, ETFs made up just about 7% of the industry’s assets in March 2020, underlining their growing acceptance among investors, both institutional and retail.
Retail Participation Skyrockets
One of the most noteworthy trends is the steep rise in retail investor participation in ETFs. Between March 2020 and March 2025, retail AUM in ETFs more than tripled—from ₹5,335 crore to over ₹17,800 crore. Even more strikingly, the number of retail folios jumped from 23.22 lakh to 2.63 crore, marking an 11-fold increase in just five years.
This surge reflects a broader shift among Indian investors toward low-cost, transparent, and passive investment vehicles. Retail investors, many of whom began investing through systematic investment plans (SIPs) or online platforms during the COVID-19 pandemic, are now showing a greater preference for index-based products that minimize fund manager bias and have lower expense ratios compared to active funds.
Currently, retail investors account for over 97% of all ETF folios in India, although a significant portion of the total AUM still remains with institutional investors like the Employees’ Provident Fund Organisation (EPFO), insurance companies, and pension funds.
ETF Landscape Expands with New Categories
The Indian ETF universe has evolved rapidly, not just in size but in diversity of offerings. The number of ETF schemes in the country has almost tripled over the last five years, expanding from a limited lineup of large-cap equity and gold ETFs to a broad selection that now includes:
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Sectoral and thematic ETFs
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Bond ETFs, including target maturity funds
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Global ETFs providing international equity exposure
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Commodity ETFs, including the first silver ETFs launched in 2022
These new categories have expanded the use cases of ETFs for both tactical and strategic asset allocation. Silver ETFs, for instance, have attracted investors looking to diversify beyond gold and equities, while global ETFs offer access to tech-heavy indices such as the Nasdaq-100 or S&P 500, often with currency hedging.
Factors Driving the Growth
Several key factors have contributed to the explosive growth of ETFs in India:
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Regulatory Support: The Securities and Exchange Board of India (SEBI) has streamlined ETF approvals and encouraged passive investing. Introduction of target maturity bond ETFs and tax parity for certain categories has made fixed-income investing more accessible.
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Cost Efficiency: ETFs typically have expense ratios as low as 0.05% to 0.20%, compared to 1–2% for many active funds. This appeals to cost-conscious retail and institutional investors alike.
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Transparency and Liquidity: Real-time pricing and daily portfolio disclosures have made ETFs more transparent than most traditional funds, while liquidity on exchanges has improved significantly, particularly for large-cap and bond ETFs.
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Democratization of Investing: Online brokers, fintech platforms, and low-commission trading apps—such as Zerodha, Groww, and Upstox—have made it easy for first-time investors to explore ETFs, often with minimum investments starting at just ₹100.
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Education and Awareness: AMCs and investment platforms have significantly ramped up investor education efforts. Campaigns around financial literacy and passive investing have played a crucial role in changing investor behavior.
Global Context: ETF Boom Continues
India’s growth in the ETF space mirrors a broader global trend. As of March 2025, there were nearly 14,000 ETFs listed worldwide, managing a combined AUM exceeding $15 trillion. The global ETF market saw record inflows of $1.9 trillion in 2024, fueled by rising demand for low-cost, diversified investment tools amid volatile macroeconomic conditions and rising interest in passive portfolios.
Outlook: ETFs Set to Play Bigger Role
Looking ahead, industry experts believe ETFs are poised to play an even larger role in retirement planning, portfolio diversification, and fixed-income investing in India. With SEBI actively promoting passive fund structures, and more AMCs entering the ETF space, the coming years could see even more innovation—potentially including active ETFs, crypto-backed ETFs (subject to regulation), and thematic funds focused on ESG, AI, or India’s digital economy.
According to Zerodha Fund House, the strong momentum in both retail and institutional adoption, along with the broadening ETF ecosystem, suggests that India could easily double its ETF AUM in the next 3–5 years if current trends continue.
