A bunch of mutual funds ranging from JM, Aditya Birla, IDFC, Nippon, ICICI, UTI have filed to launch a variety of index funds. Now, this is a good thing for investors because more competition means lower costs and better fund management - there have been index funds which
have outperformed their indices. BUT NOT SO FAST! Not all AMCs care of managing those funds properly. For most AMCs, these index offerings are me too, shelf-filler products. Just launching them for the heck of it. Just like most AMCs have ETFs which have done a piss-poor
job of tracking the benchmarks. What has happened post the SEBI scheme recategorization exercise is the AMCs are allowed to have only one fund per category except for thematic funds, index funds, and fund of funds (FOFs). Before this, some of the AMCs used to multiple schemes
with similar characteristics to garner AUM. Afterall, almost all of the AMCs are in the business of asset gathering assets and making money. Delivering good returns is incidental to the business of gathering assets, it's not the primary objective. Before someone lynches me -
yes, there are good AMCs, which care about delivering good outcomes, but I can count them on one hand. But I'll admit that I am heavily biased! Anyway, SEBI said, stop the shenanigans, one category = one fund. Now if AMCs can't launch new funds, they can't sell new shiny
objects, if they can't sell new shiny objects, can't pull in fresh assets. Sometimes, selling a new NFO with fancy bells and whistles is better than selling an old and staid offering. Now, since an AMC can launch any number of index funds, AMCs are making a beeline to file
for launches. On the one hand, as I said, this is good for investors. But on the other, I think this is terrible. All of these AMCs are active giants. Only a couple of AMCs are remotely interested in genuinely offering well managed passive products. Why you ask? Because the
average expense ratio of an actively managed large-cap fund (direct) is 1.25%, which that of a Nifty 50 index fund is 0.1-0.15%. Why focus on index products and let go of dat delicious 1%😋. Nothing wrong with this, AMCs are businesses and their job is to make money for their
shareholders. The problem is with dumbass investors like me is we expect them to at least act like fiduciaries (lite version). It's not their job to give a shit about you, it's your own. Anyway, index funds seem to be the new avenue for AMCs to gather assets. But it's not going
to be easy because, all of these funds have to be low-cost, which means you cannot pay distributors to distribute. Mutual funds are SOLD, not BOUGHT! But, at the same time, alpha (Excess returns) is finite. Indian markets for all the "India growth story" bullshit
haven't really grown. The number of new listing haven't been off the charts. The biggest companies are still the old economy stocks. We don't got no FANGS! We just have 2cr unique mutual fund investors. Total number of active demat accounts - an unclean proxy for
direct equity investors have plateaued. If you cannot pay distributors, that means, the only audience left is the direct, DIY, self-direct investor crowd. And that one is even smaller. Just 18% of the MF industry AUM is in direct plans. Out of which, if I were to hazard a guess, 
a REALLY BIG chunk is HNI RICH PEOPLE money. So there's only hike a half-fistful people who give a shit about index funds. NO, THEY AREN'T POPULAR in India. All the noise is limited to twitter and by people like me. NOBODY GIVES A SHIT ABOUT INDEX FUNDS IN INDIA 😖🥺
A good chunk of funds today are closet index funds - 80% beta, 20% bullshit. So, some of these AMCs are launching these funds to have a foot in both active and index funds, without really focussing all in one category. Gotta gather them assets! I am not saying all of those AMCs
are the same, but some are. But I have high hopes in the like of Motilal, Nippon, UTI, etc because they seem to be genuinely interested in building a suite of low-cost products. You may ask what about the active vs passive conflict within the AMCs. Sure, it's a fair question.
But as long as the index funds track the benchmarks tightly like a wrong-sized jeans on a 70kg dude, I am fine, and I don't care either. It doesn't mean they won't have conflicts internally and externally too. They'll have to answer that question for a loongg time. But hey,
there will never be a Vanguard in India. So, we gotta take what we get. Now, coming to a long-winded summary Most of thee AMCs won't care about these index products, they'll launch it in the hopes that, once the shift from active to index funds happens, they'll have products to
capture that organic AUM growth. But in the meanwhile, if you are investor, make sure the AMC is committed to low-cost index funds. You don't need to invest in an index fund NFO. There are plenty of existing funds with track records. Stick to them.
