Active and passive management are two distinct ways of managing portfolios. An active fund manager’s aim is to outperform the benchmark on a risk-adjusted basis whereas a passive fund manager’s mandate is to replicate the benchmark’s portfolio and performance. With active funds underperforming, a lot of interest and assets under management are moving towards passive funds. Index funds are the most popular type of passive funds. In India, the first index fund was offered in 2001, and since then index funds have come a long way. As on 30 June 2022, there were 94 index funds in India managing around ₹83,000 crore. Currently, 19 index funds track the Nifty 50, and invest in the same 50 companies as in the index (same proportion).
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