What do non-bank Navi and discount brokers Zerodha* and Groww have in common? Sure, they’re the cool new kids trying to shake up India’s $750 billion mutual-fund industry. And yes, they’ve all launched new fund offers (NFOs) in the past six months.

But more importantly, every single one of those NFOs is a passive fund—index fundsIndex funds An index fund mimics the composition and performance of a market index. It can be bought and sold at the price (net asset value) at the close of the trading day and exchange-traded funds Exchange-traded funds An exchange traded fund (ETF) is a basket of securities that tracks an underlying index and trades like a stock on exchanges(ETFs) that don’t rely on expensive fund managers but instead just… mirror the market.

In February, Navi Mutual Fund debutedHindu Businessline Navi MF’s Smallcap250 Momentum Quality 100 Index Fund NFO concludes on March 10 a small-cap fund. Groww, too, launchedEconomic Times NFO Monitor: Groww Mutual Fund launches two passive funds two passive funds—one tracking the Nifty200 and another that just buys the first one. Last October, Zerodha Fund House rolled out an open-ended scheme investing primarily in units of Gold ETF. 

The playbook is clear. These fund houses—and others like NJ Mutual Fund—dreamed of big disruption, convinced that passive investing was the future. (The Ken had written about thisThe Ken Zerodha, Navi, and the new wave disrupting mutual funds with passive aggression back in 2021.) 

They had good reason to believe so. Last year, passive funds won the big game in the US, where—for the first time ever—they overtook active funds in assets under management (AUM). Blackrock and Vanguard built empires on this shift. So, naturally, the question is: why not in India?

Well.

India’s Vanguard moment isn’t exactly imminent. Passive AUM has certainly surged—it’s more than tripled in four years to Rs 10 lakh crore ($120 billion).