Why do Actively Managed Funds Outperform Index Funds in India?

What is the fuss?

The concept of Index Funds has existed since the 1970s, when the “Efficient Market Hypothesis” was developed. Index means tracking a certain stock market index, which is a collection of stocks forming the index.

John Bogle, often called the father of Index Investing, founded the Vanguard Group and launched the first index fund in 1976.

Most actively managed funds in the US have been unable to beat the index. This fact is slowly sinking in, and the FIRE movement in the USA primarily focuses on investing via the index to become financially free.

Investing in index funds offers multiple benefits, including higher returns and low costs.

But what does the story of Index funds look like in India?

Well, it is mixed, and most top actively managed mutual funds in India consistently beat the Indian stock market index funds over a 5+ year period.

But why is that?

In this post, I share six reasons why the Indian actively managed mutual funds outperform index funds and why they might continue to do so in the near future.

We will first compare the performance of the Indian index and actively managed funds and then examine…