Passive funds: Select ones with low tracking error, say experts

In case of an ETF, prefer those that also have large trading volume and AUM

With Indian investors warming up toward passive investing, fund houses have been launching exchange-traded funds (ETFs) and index funds at a rapid pace. The assets under management (AUM) of index funds stood at Rs 112,603.2 crore on October 31, 2022, up 200 per cent year-on-year (YoY). ETFs’ (excluding gold) AUM stood at Rs 482,654.6 crore, up 30.3 per cent YoY, according to the Association of Mutual Funds in India (Amfi) data.

Why go passive

According to the S&P Indices Versus Active Funds (SPIVA) India Scorecard, 67.4 per cent large-cap schemes underperformed the S&P BSE 100 index over the 10-year period