Index Funds Surge 48% in One Year, Experts Advise Diversification Across Segments and Sectors

Index funds have seen a 48% rise in the number of schemes offered by mutual fund houses, with 341 schemes available in August compared to 230 last year. Experts recommend investing in broader market funds to diversify across segments and sectors, as costs are lower compared to actively-managed funds. Retail and high net worth investors have adopted index funds, while ETFs tend to be focused towards corporates and pension funds.

Index funds have experienced a significant rise in popularity, with the number of schemes offered by mutual fund houses increasing by 48% in the past year. According to data from August 2025, there were 341 index fund schemes available, up from 230 schemes in the same month last year Index funds rise 48% in one year^[1]. This growth reflects a rising investor appetite for low-cost passive investing.

Experts recommend that investors diversify their portfolios by investing in broader market funds. By doing so, they can gain exposure to a wider range of segments and sectors, reducing the risk associated with concentrating investments in a single index or sector. Hemen Bhatia, ED and CEO of Angel One Asset Management Company, suggests that investing in a Nifty Total Market index fund can achieve around 90% exposure to India's market, while a Nifty 50 fund can provide 45-50% exposure Index funds rise 48% in one year^[1].

While Nifty 50 and Sensex-based products continue to attract the majority of inflows, Pratik Oswal, head of passive funds at Motilal Oswal AMC, advises investors to consider broader market funds. He notes that investing in a Nifty 50 fund concentrates 60% of the investment in the top ten stocks and half of it in only two sectors Index funds rise 48% in one year^[1]. Siddharth Srivastava, Head – ETF Product & Fund Manager, Mirae Asset Investment Managers (India), agrees that investing in broader market funds can provide wider exposure to multiple segments and industries, better covering the equity market Index funds rise 48% in one year^[1].

Additionally, BlackRock has been transforming some of its active funds into ETFs to align with its growing model portfolio platform. The firm converted two $3 billion mutual funds into ETFs, with the new funds retaining the same strategies and led by Rick Rieder and his team BlackRock transforms $3 billion in active funds into ETFs to feed model portfolio engine^[2]. This move is part of BlackRock's strategy to better fit within its model ecosystem and satisfy client demand for active ETFs.

In conclusion, the surge in index funds reflects a growing investor preference for low-cost, passive investing. Experts recommend diversifying portfolios through broader market funds to mitigate risk and gain exposure to a wider range of segments and sectors. Meanwhile, BlackRock's transformation of active funds into ETFs demonstrates the evolving landscape of investment strategies.