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Index Funds Accused of Inflating Nifty 50
12 Feb
Summary
- 92% of active fund managers underperformed the index post-Covid's second wave.
- Massive passive inflows, especially from EPFO-backed ETFs, are noted.
- Concerns arise that index investing might distort market prices.
In the aftermath of Covid's second wave, a striking 92% of active fund managers were unable to outperform the index. This period, marked by market volatility and economic slowdown, proved challenging for investors.
Currently, massive passive investment inflows are being observed, amounting to INR7,500 crore per month. These inflows are notably driven by ETFs backed by the Employees' Provident Fund Organisation (EPFO).
However, this surge in passive investing is now facing accusations. Critics suggest that these large inflows may be artificially inflating the prices of Nifty 50 stocks, raising questions about whether index investing is becoming a tool that distorts market dynamics. This trend could be reshaping India's financial landscape.
