The inflows into passive funds increased 22 per cent last year to ₹1.62 lakh crore against ₹1.32 lakh crore logged in 2024, largely due to steady inflows into gold exchange traded funds.
The asset under management of passive funds increased 31 per cent to ₹14.57 lakh crore ( ₹11.12 lakh crore).
Of the overall investments, gold inflows more than tripled to ₹42,962 crore (₹13,250 crore), according to the Association of Mutual Funds in India (AMFI) data.
Interestingly, the fund-raise through passive new fund offers (NFOs) dipped 48 per cent to ₹7,624 crore (₹14,832 crore) despite the number NFOs increasing to 155 last year against 135 in 2024.
Stability amid volatility
Passive funds offer low-cost exposure to the broader market and reduce the need for frequent stock selection, making them a suitable option for long-term investors. In uncertain times, they help investors stay invested without reacting emotionally to short-term market movements.
Rishabh Nahar, Partner and Fund Manager at Qode Advisors, said fund flows into passive funds have increased sharply in 2025, as investors look for stability amid ongoing market volatility.
While passive funds can serve as a core holding, he said selective exposure to quality businesses with strong balance sheets can add value over time.
Portfolio diversifiers
Alongside equities, gold and silver should be viewed as portfolio diversifiers rather than tools for speculation or return generation. Precious metals have historically helped reduce overall portfolio risk during periods of economic uncertainty, inflation concerns, and geopolitical events, he said.
Given the frequency of major global and domestic news events, periodic reviews and timely rebalancing are important to ensure asset allocation remains aligned with risk tolerance and financial goals, added Nahar.
Jashan Arora, Director, Master Trust Group, said passive funds work best for long-term investing and as a core part of the portfolio, while active funds can perform better during market volatility or in specific segments. A balanced approach with passive funds at the core and select active funds for higher returns can help investors get the best of both worlds, he said.
Gold vs silver
While domestic silver has outperformed gold at times supported by industrial demand, gold is significantly less volatile, globally recognised as a safe-haven asset and offers better liquidity and downside protection during market stress, he said.
Silver is better suited as a tactical, higher-risk allocation linked to economic growth cycles, while gold acts as a stable anchor for long-term wealth preservation, said Arora.