# India’s passive turn

> India balances passive investing growth with market resilience.
- Title: India’s passive turn · Financialexpress | Shortify
- Summary: India balances passive investing growth with market resilience. India must balance passive investing growth with market resilience to avoid inefficiency…
- Keywords: india, passive investing, mutual funds, equity market, market efficiency, financial markets, index funds, active funds, business, money, news, passive
- Source: Financialexpress — https://financialexpress.com/opinion/indias-passive-turn/4364325
- Author: Saumitra Bhaduri
- Published: 2026-10-18T16:50:41+00:00
- Read time: 1 min
- Topics: india, passive investing, mutual funds, equity market, market efficiency, financial markets, index funds, active funds, business, money, news
## Passive investing origins
Passive investing began with Harry Markowitz's 1952 portfolio theory showing diversification improves risk-return trade-offs.
## First passive fund launched
John C Bogle launched the world's first index mutual fund in 1976, the Vanguard 500 Index Fund.
## US passive dominance
By 2025, passive funds held over half of the US fund market with 63% of equity assets at $22 trillion.
## Market inelasticity concern
Passive investors show inelastic demand, meaning price changes affect market value more than quantity adjustments.
## Inelastic markets hypothesis
Xavier Gabaix and Ralph Koijen's 2021 research shows $1 inflow can raise market value by $5, challenging efficient markets theory.
## India's passive growth
India's passive mutual funds grew from 3% of AUM in FY17 to 18% by end of FY26, reaching `14.63 lakh crore.
## India's market position
India sits between Japan's passive expansion and China's active strategy dominance in regional markets.
## Market concentration risk
Indian equity indices are already concentrated, with passive inflows potentially reinforcing dominant firms' market share.
## Price discovery risk
As passive investors grow, markets may become less responsive to new information and more influenced by flows.
## Flow-driven volatility
Large passive inflows can inflate prices while outflows amplify declines, creating episodic market volatility.
## Key takeaway

India must balance passive investing growth with market resilience to avoid inefficiency while maintaining price discovery.