Globally, the rise of passive investing has been driven by the belief that markets are efficient and that low-cost index funds deliver superior long-term outcomes. While this argument often holds in highly institutionalised markets such as the U.S., it does not translate cleanly to India’s equity markets.

This whitepaper examines why India remains structurally favourable for active fund management. With lower institutional participation, a higher share of retail flows, and persistent inefficiencies across market segments, Indian equities continue to offer skilled managers the opportunity to generate alpha through research, stock selection, and tactical allocation.

Using publicly available performance data from 2015 to 2024, the study analyses mutual funds and PMS strategies across Large Cap, Large & Mid Cap, Flexi Cap, Mid Cap, and Small Cap categories. The findings show that active funds have not only outperformed their benchmarks in a majority of cases, but have done so consistently across different market cycles—including both strong bull phases and periods of stress.

Importantly, the results are broad-based. Outperformance is not limited to a small group of star managers. Even at the average fund level, active strategies have delivered meaningful excess returns over passive benchmarks, translating into significant real-world wealth differences over long investment horizons.

The whitepaper also highlights the few periods where passive strategies temporarily performed better, explaining why such phases tend to be cyclical rather than structural. For investors, the takeaway is clear: in India, active investing remains a powerful long-term tool—but outcomes depend heavily on fund selection, discipline, and the quality of research underpinning portfolio decisions.