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New Delhi: Mutual Fund investment is increasing rapidly in the country and a large number of new investors are entering the market through SIP. In such an environment, the question has become even more important whether it is better to trust the stock picking of a fund manager or are passive funds that follow market indices directly a wiser option? The popularity of passive funds has increased significantly in recent years, where this category has now reached about Rs 12 lakh crore, while the AUM of the entire industry is around Rs 80 lakh crore. Low spending, transparency and SEBI regulations have strengthened passive funds. Investors are now comparing active funds not just by name, but by their consistency and ability to beat benchmarks.
In Active Funds, the entire game runs on the skill and strategy of the fund manager. Fund managers decide which stock to buy, when to sell, and how much to invest in which sector, based on research, industry trends, company management, and market data. They always aim to return more than benchmark indices like Nifty 50, Sensex or Nifty Midcap 150. If managers make the right decisions, the returns can be fantastic, but wrong decisions have a direct impact on the portfolio.
The principle of passive funds is simple — don't beat the market, copy it. These funds track their benchmark indices like Nifty 50, Nifty Next 50 or Nifty Midcap 150 exactly. Depending on the change in the index, the fund is also modified. Since the role of a fund manager is limited, the expenses are low and the risk is also slightly reduced. Investors get stable returns like indices.
Low expenses, easy understanding, high transparency and stable returns have made passive funds increasingly popular. While investors used to choose the active category without thinking, they are now comparing the two options on scales such as 1-year versus 10-year returns, benchmark beating, and fund consistency. SEBI's new rules have increased transparency between the two categories, so investors are now taking more data-driven decisions.
| Active Funds (1-Year) | Category | Return |
|---|---|---|
| HDFC Transportation & Logistics Fund (Direct) | Sectoral: Auto & Transportation | 24.32% |
| DSP Credit Risk Fund (Direct) | Debt | 22.55% |
| DSP Multi Asset Allocation Fund (Direct) | Hybrid: Multi-Asset | 20.80% |
| DSP Banking & Financial Services Fund (Direct) | Equity: Sectoral–Banking | 20.08% |
| HDFC Defence Fund (Direct) | Equity: Thematic | 19.88% |
Top Passive Funds ( 1 year Returns)
| Passive Funds (1-Year) | Category | Return |
|---|---|---|
| Motilal Oswal Nifty India Defence Index Fund (Direct) | Thematic | 32.95% |
| ABSL Nifty India Defence Index Fund (Direct) | Thematic | 32.18% |
| Tata Nifty Capital Markets Index Fund (Direct) | Thematic | 27.47% |
| Kotak Nifty Financial Services Ex-Bank Index Fund (Direct) | Sectoral–Banking | 25.93% |
| Motilal Oswal BSE Financial Ex-Bank 30 Index Fund (Direct) | Sectoral–Banking | 20.38% |
| Active Funds (10-Year) | Category | Return |
|---|---|---|
| Nippon India Small Cap Fund (Direct) | Equity: Small Cap | 21.74% |
| DSP Natural Resources & New Energy Fund (Direct) | Thematic: Energy | 20.62% |
| Axis Small Cap Fund (Direct) | Equity: Small Cap | 20.29% |
| Edelweiss Mid Cap Fund (Direct) | Equity: Mid Cap | 20.19% |
| HDFC Small Cap Fund (Direct) | Equity: Small Cap | 19.88% |
| Passive Funds (1-Year) | Category | Return |
|---|---|---|
| Motilal Oswal Nifty India Defence Index Fund (Direct) | Thematic | 32.95% |
| ABSL Nifty India Defence Index Fund (Direct) | Thematic | 32.18% |
| Tata Nifty Capital Markets Index Fund (Direct) | Thematic | 27.47% |
| Kotak Nifty Financial Services Ex-Bank Index Fund (Direct) | Sectoral–Banking | 25.93% |
| Motilal Oswal BSE Financials Ex-Bank 30 Index Fund (Direct) | Sectoral–Banking | 20.38% |
(Disclaimer: This article is only meant to provide information. TV9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds, gold, silver and crypto assets.)
