Can passive investing shield investors from market downturns?
Subscribe to enjoy similar stories. Passive investing has garnered increasing attention alongside active strategies, especially as concerns about market dips loom, with the Nifty 50 climbing over 30% in the past year. In this scenario, passive investments, particularly index funds and ETFs, offer a reliable approach to managing risks, providing diversification, lower costs, and market-matching returns.
Tracking indices like Nifty 50 or Sensex allows these funds to spread investments across multiple stocks and sectors, reducing the risks tied to a single company's performance. “With lower fees and efficient tracking of overall market performance, they are a relatively safe choice, particularly in volatile markets," said Chintan Haria, principal investment strategy at ICICI Prudential AMC. In today’s landscape of global inflation concerns, fluctuating interest rates, and occasional market volatility, index funds and ETFs present a relatively better investment avenue for less informed investors who are investing in direct equities, he said.
"Investing in index funds and ETFs eliminates the probability of underperformance," said Pratik Oswal, chief of business passive funds at Motilal Oswal AMC. He noted that investors are now diversifying beyond the traditional Nifty 50 and Sensex, moving into midcap indices and the Nifty 500. In India, indices such as Nifty 50, BSE Sensex, Nifty Next 50, and Nifty 500 consistently attract the highest investor interest.
Nifty 50 and BSE Sensex are especially favored for representing the largest, most liquid companies, making them key benchmarks for market performance. Unlike before, demand is now more broad-based and no longer dominated by institutional investors, Oswal said. In fact, over
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