Indian Exchange Traded Funds (ETFs) achieved their highest-ever annual net inflows of ₹1.81 lakh crore in FY26, more than doubling the previous peak, according to a study by Zerodha Fund House. The inflows significantly surpassed the earlier high of ₹83,390 crore recorded in FY22, marking a sharp departure from the previous five-year trend of annual ETF inflows ranging between ₹46,000 crore to ₹83,000 crore from FY21 to FY25. January 2026 recorded the highest monthly inflows with over ₹39,000 crore, driven by heightened activity in gold and silver ETFs amid global market uncertainty.
Commodity ETFs accounted for the majority share of inflows during FY26, with gold and silver ETFs together attracting ₹99,280 crore, contributing around 55% of total inflows, while equity ETFs received over ₹77,780 crore, or 42.9% of the total. Gold ETFs saw particularly strong growth with net inflows of ₹68,868 crore in FY26, contributing 38% of total inflows, while silver ETFs recorded net inflows of ₹30,412 crore, or 16.8%. Assets under management (AUM) for gold ETFs rose dramatically from about ₹59,000 crore in March 2025 to over ₹1.71 lakh crore in March 2026, marking a 191% increase and surpassing the combined inflows of around ₹30,200 crore recorded over the previous five financial years. The shift toward commodity ETFs represents a notable change in investor allocation strategies, as commodity ETFs made up less than 17% of overall ETF flows as recently as FY24.
Silver ETFs, introduced in 2022, recorded strong traction with net inflows exceeding ₹30,000 crore during FY26, exceeding their total AUM at the start of FY26. The rise in gold and silver prices, along with the tax efficiency of ETFs compared to physical metals, may have contributed to increased investor preference for these instruments. As per Zerodha Fund House, the growth reflects both rising precious metal prices and fresh investor inflows, with tax efficiency supporting preference for ETFs over physical holdings as gold and silver ETFs qualify for long-term capital gains tax after 12 months, compared to 24 months for physical assets.
Liquidity in the ETF segment has improved sharply, with average daily turnover rising nearly 18 times from ₹237 crore in FY21 to over ₹4,200 crore between April 2025 and February 2026. Commodity ETFs led this surge, with average daily turnover of about ₹2,700 crore, significantly higher than equity ETFs at ₹745 crore. This dramatic increase in trading activity indicates improved liquidity and growing participation in the ETF market, with investors increasingly using ETFs to build diversified portfolios as noted by Zerodha Fund House CEO Vishal Jain, who highlighted that this shift reflects evolving investor behaviour away from the traditional equity-focused approach.
While ETFs attracted record inflows, foreign portfolio investors (FPIs) have simultaneously sold Indian equities worth over ₹1.8 lakh crore in 2026, surpassing the total for all of 2025, according to The Economic Times. This selling represents the most significant outflow by overseas investors in the first four months of any calendar year, driven by a weaker rupee, elevated oil prices, and limited AI investment opportunities in India. The unabated outflows are an extension of selling by FPIs since September 2024, when sentiment on India turned sour after corporate earnings growth failed to match rich share valuations. As per IIFL Capital Services Sriram Velayudhan, foreign outflows were driven by weak rupee and deceleration in earnings momentum, while South Korea and Taiwan saw increased foreign interest as these markets offered bets on AI and semiconductor themes at cheaper valuations.
