Passive Is Catching Up

Those who felt that passive investing is for sissies need to sit up and look around. In the past one year, the asset base of equity ETFs has shot up from ₹15,066 crore as on March 31, 2016 to ₹43,234 crore as of March 31, 2017, according to the AMFI data. An exchange traded fund (ETF) is similar to an index fund, which invests in a basket of securities, which are part of a pre-decided index, in the same proportion as that of the index. For instance, the Reliance ETF Sensex will invest in exactly the same proportion as the constituents of the S&P BSE Sensex.

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The surge in the assets is attributed to the increasing contribution into ETFs by retail investors as well as the Employees’ Provident Fund Organisation (EPFO). Moreover, as part of its disinvestment strategy, the government has from time-to-time opened the CPSE ETF for subscription, which has also brought in more investors under the ETF umbrella.