Index Funds are the go-to choice for India's young investors, shows survey
- IBEF
- November 14, 2024
Index funds have gained significant popularity among Gen Z and Millennials, with 46-48% of investors under 43 preferring them, compared to 35% among Gen X and Boomers, according to a survey by Motilal Oswal Asset Management Company. These funds aim to mirror the performance of specific stock market indices like Nifty 50 or Sensex, representing top companies listed on the Indian stock market. For instance, an investment of US$ 118.54 (Rs. 10,000) in a Nifty 50 index fund is divided proportionally across the 50 top companies, including Reliance and HDFC Bank. If the Nifty 50 grows by 12% over the year, the investment will grow similarly. Sectoral indices are also popular, with younger and middle-aged investors preferring Indian sectoral indices over commodities and smart beta funds.
The growth of passive funds in India has been remarkable, with Assets Under Management (AUM) surpassing US$ 130.39 billion (Rs. 11 trillion) by September 2024, marking a 1.5x YoY increase. Chief of Passive Business at Motilal Oswal AMC, Mr. Pratik Oswal, attributes much of this momentum to Millennials and Gen Z. Passive funds, unlike active ones, require less monitoring, making them attractive for long-term investors. The survey revealed that 98% of investors are aware of passive funds, with 74% favouring index funds. Most (82%) of investors in passive funds have a long-term horizon, intending to hold their investments for over three years. Investors anticipate a 15% increase in allocation towards passive funds. Among passive fund investors, 40% allocate 10-30% of their portfolios to such funds, with 80% increasing their allocation in the past year.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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