The Indian Exchange Traded Fund (ETF) market has reached a significant milestone, with Assets Under Management (AUM) exceeding ₹10 lakh crore as of October 2025. This achievement signifies a major shift in investor preferences towards cost-effective and transparent investment options. The ETF industry has doubled its AUM in just three years, transitioning from a niche product to a mainstream investment avenue.
Drivers of Growth
Several factors have contributed to this impressive growth. A key driver is the surge in retail investor participation, with the number of ETF folios increasing more than eight-fold from approximately 41 lakh in November 2020 to over three crore by November 2025. This rise is attributed to growing investor awareness and improved accessibility through digital investment platforms.
Trading activity in the ETF market has also surged dramatically. Trading volumes for ETFs have increased more than seven-fold, from ₹51,000 crore in FY 2019-20 to ₹3.83 lakh crore in FY 2024-25. The momentum has continued into the current financial year, with trading volumes in the first half of 2025-26 already exceeding ₹3.2 lakh crore, nearly matching the entire volume recorded in the previous full year. This heightened liquidity has resulted in tighter spreads, better price discovery, and smoother trade execution.
Diversification and Investor Preferences
While equity ETFs continue to dominate, accounting for a substantial portion of new folios, investors are increasingly diversifying their holdings. There's a growing interest in precious metals, with gold and silver ETFs now representing nearly 15% of the total ETF AUM. In the past year alone, the AUM for gold ETFs doubled to surpass ₹1 lakh crore, while silver ETF AUM quadrupled to exceed ₹49,000 crore.
Why ETFs are a Must-Add to Your Portfolio
ETFs offer several compelling advantages for investors:
- Diversification: ETFs provide instant diversification across various sectors or asset classes, reducing the risk associated with investing in individual stocks. By investing in a single ETF, investors gain exposure to a basket of stocks, bonds, or commodities.
- Low Cost: ETFs typically have lower expense ratios compared to actively managed mutual funds. Because they often passively track an index, their management fees are generally lower.
- Liquidity: ETFs trade on stock exchanges like individual stocks, offering investors the flexibility to buy or sell them at any time during market hours.
- Transparency: ETFs typically track a known index or asset, making it easy for investors to understand their holdings. The indicative Net Asset Values (NAVs) are available in real-time, providing transparency.
- Tax Efficiency: Due to their structure, ETFs can be more tax-efficient than some other investment vehicles.
Vaibhav Jalan, Chief Business Officer at Zerodha Fund House, notes that ETFs serve as a versatile tool for new investors, providing exposure to different asset classes, themes, and segments in a simple, cost-effective, and transparent manner. Vishal Jain, CEO of Zerodha Fund House, sees the crossing of the ₹10 lakh crore AUM mark as a landmark moment for the Indian ETF space, highlighting the product's maturity and widespread adoption.
As the Indian ETF market continues to grow and evolve, it presents a compelling opportunity for investors to build diversified, cost-effective, and transparent portfolios. Whether you are a seasoned investor or just starting, considering ETFs as part of your investment strategy can be a prudent decision.
