India ETF assets hit record Rs 11.5 trillion as Q3 inflows accelerate to Rs 351.2 billion

MUMBAI: India’s exchange-traded fund (ETF) industry crossed a major milestone in the third quarter of 2026, with total assets under management rising to a record Rs 11.50 trillion. According to market intelligence compiled by Morningstar Manager Research in its Asia-Pacific ETF Flows Q3 2026 report, domestic ETF net inflows accelerated to Rs 351.2 billion during the quarter, modestly higher than the Rs 333.8 billion collected in the preceding three months.

The growth reflects a combination of sustained investor interest in core large-cap Indian equities and a sharp revival in allocations to real assets, particularly gold and silver. Although softer broader market performance limited the expansion in total asset value relative to the amount of fresh money entering the market, India’s ETF segment continued to establish itself as one of the fastest-growing investment vehicles in the Asia-Pacific region.

The third quarter reinforced the structural momentum behind India’s ETF market. Net cash inflows rose across key domestic asset classes, lifting total industry assets under management from Rs 11.45 trillion at the end of June 2026 to Rs 11.50 trillion by September 30. In US dollar terms, Indian ETF assets stood at approximately $120 billion.

The quarterly net inflow of Rs 351.2 billion marked an improvement over the Rs 333.8 billion recorded in Q2 2026. The increase came despite uneven market conditions, indicating that investor demand for ETFs remained resilient even as broader equity performance softened.

A strong rebound in real-asset strategies complemented steady flows into equity products. The combination helped the Indian ETF market reach its record asset base while also broadening participation beyond traditional equity index funds.

Large-cap funds lead inflows

Equity ETFs remained the largest recipients of new capital during the quarter, attracting Rs 235 billion in net inflows. Within this category, investor preference was heavily concentrated in large-cap strategies, which alone garnered Rs 218.8 billion.

Morningstar’s analysis pointed to continued allocations towards broad-market benchmark products, supported by the wider range of established large-cap ETF offerings available to investors. By contrast, mid-cap equity ETFs attracted a comparatively modest Rs 4.9 billion during the quarter.

The largest fund-level inflows were concentrated in flagship Nifty 50 and Sensex tracking products. Nippon India ETF Nifty 50 BeES led the market with net inflows of Rs 36.8 billion, followed by SBI Nifty 50 ETF with Rs 33.6 billion and ICICI Prudential Nifty 50 ETF with Rs 28.3 billion.

ICICI Prudential BSE Sensex ETF attracted Rs 25.5 billion, while UTI Nifty 50 ETF received Rs 22.9 billion. All five of the largest fund-level net inflow recipients during the quarter were broad-market large-cap equity products.

Sector-specific equity funds, however, saw selective profit-taking and portfolio rebalancing. Technology sector ETFs recorded the largest net redemptions among equity categories, losing Rs 4.9 billion despite a notable recovery in the underlying Nifty IT Index. Infrastructure equity ETFs also posted net outflows of Rs 1.9 billion.

Precious metals drive rebound

One of the most significant shifts in the quarter was the sharp revival in real-asset ETF allocations. Net inflows into real-asset strategies rose from Rs 72.7 billion in Q2 2026 to Rs 121.3 billion in Q3 2026.

The acceleration was driven almost entirely by renewed demand for precious metals ETFs, particularly products tracking gold and silver. As macroeconomic uncertainty persisted and global interest-rate expectations fluctuated, domestic investors increasingly turned to precious metals as strategic hedges and inflation shields.

The Rs 121.3 billion influx into precious metals ETFs made the category the second-largest net flow recipient across all Morningstar categories in India during the third quarter. The performance underscored a growing appetite among investors for diversification beyond equities, especially during periods of market volatility.

Banking rotation emerges

Financial services ETFs recorded aggregate net inflows of Rs 7.9 billion in Q3 2026, but the headline number concealed a pronounced rotation within the banking segment.

Private bank ETFs continued to attract strong investor interest, drawing Rs 13.0 billion during the quarter after receiving Rs 16.1 billion in Q2. This marked a second consecutive quarter of robust inflows into private banking-focused products.

SBI Nifty Private Bank ETF alone attracted Rs 8.1 billion, while ICICI Prudential Nifty Private Banks ETF received Rs 3.7 billion. Together, the two funds accounted for 91 per cent of total private bank ETF inflows during the quarter.

In contrast, broad banking index ETFs extended a year-long trend of net outflows. These products shed Rs 8.7 billion in Q3, taking year-to-date withdrawals to Rs 41.5 billion.

PSU bank ETFs saw mixed demand, resulting in a modest net outflow of Rs 0.8 billion. A large redemption of Rs 6.8 billion from the SBI BSE PSU Bank ETF -- the single biggest fund-level net outflow in the Indian market during the quarter -- was largely offset by inflows into competing products. DSP Nifty PSU Bank ETF attracted Rs 3.4 billion, while Kotak Nifty PSU Bank ETF received Rs 1.9 billion.

Debt funds under pressure

Fixed-income ETFs continued to face net outflows during the quarter, extending a multi-quarter pattern of redemptions. Long-duration bond categories bore the brunt of investor caution as the Reserve Bank of India maintained a neutral-to-hawkish monetary policy stance.

The policy environment dampened investor willingness to take on duration risk, particularly in longer-tenor debt products. Medium-to-long duration debt ETFs recorded net outflows of Rs 8.1 billion, while long-duration bond funds and government bond funds shed Rs 2.1 billion and Rs 1.7 billion, respectively.

Short-term liquidity strategies, however, saw moderate additions. Overnight fund strategies attracted INR 6.1 billion during the quarter, reflecting investor preference for parking money in highly liquid instruments amid uncertainty over interest-rate direction.

SBI retains leadership

The competitive hierarchy among Indian ETF providers remained anchored by State Bank of India’s asset management arm, SBI Funds, even as competition from smaller and newer managers intensified.

SBI Funds retained its position as the market leader with INR 3,625.9 billion in assets under management, accounting for 31.5 per cent of the total Indian ETF market. The fund house also recorded one-year net inflows of Rs 396.7 billion through Q3 2026.

Nippon India ETF held second place with Rs 2,452.6 billion in assets, representing a 21.3 per cent market share. It was the industry leader in one-year net flows, attracting Rs 450.3 billion over the period, supported by a strong retail ETF presence.

ICICI Prudential ranked third with Rs 1,487.2 billion in assets and a 12.9 per cent market share. The fund house recorded one-year net inflows of Rs 333 billion, reflecting balanced strength across equity and private bank ETF categories.

UTI Mutual Fund held fourth position with Rs 1,352.0 billion in assets and an 11.8 per cent market share. Its one-year net inflows stood at Rs 213.4 billion, underpinned by its established suite of core index benchmark products.

Edelweiss managed Rs 581.6 billion in assets, holding a 5.1 per cent market share, but recorded net outflows of Rs 9.1 billion over the past year as it navigated headwinds in the fixed-income segment. HDFC Mutual Fund, with Rs 434.8 billion in assets and a 3.8 per cent share, recorded one-year net inflows of Rs 118.6 billion as it expanded its equity and sector ETF offerings.

Kotak Mutual Fund managed Rs 343.8 billion in assets, representing a 3.0 per cent market share, with one-year net inflows of Rs 54 billion. Mirae Asset held Rs 252.7 billion in assets, or 2.2 per cent of the market, with one-year net inflows of Rs 64.2 billion, driven by its focus on thematic equity and sector index strategies.

Motilal Oswal managed Rs 221.8 billion in assets, accounting for a 1.9 per cent market share, with one-year net inflows of Rs 38.9 billion. Zerodha Fund House, a fast-growing direct-to-investor passive specialist, expanded its assets to Rs 150.1 billion, holding a 1.3 per cent market share and recording one-year net inflows of Rs 78.6 billion.

With total industry assets reaching unprecedented levels and investor participation broadening across core equities, precious metals and targeted sector strategies, India’s ETF ecosystem continues to display characteristics of an increasingly mature market within the broader Asia-Pacific landscape.

The quarter’s performance suggests that Indian investors are not merely chasing equity returns but are also using ETFs to diversify into gold, silver and other real assets. At the same time, the continued dominance of large-cap index funds highlights the enduring appeal of broad-market, low-cost exposure to India’s largest listed companies.