Exchange-Traded Funds now account for approximately 29% of total global fund assets as of 2025. By the end of 2025, approximately 14,000 ETFs were trading around the world, with global ETF assets reaching USD 14.85 trillion by the close of 2024. What began as a single index-tracking product in the early 1990s has become a foundational instrument across retail and institutional portfolios globally. Understanding how that happened requires tracing both the structural innovation behind ETFs and the investor behavior that drove adoption at scale.
The Product Architecture That Made ETFs Distinct
The first ETF launched in Canada in 1990, tracking the Toronto Stock Exchange 35 Index. Three years later, the S&P 500 Trust ETF, known as the SPDR or “Spider,” launched in the United States and introduced the core ETF structure to a broader market. The fund was the first to reach $500 billion in AUM in February 2024 and crossed $600 billion by October 2024, though it has since been overtaken by Vanguard’s S&P 500 ETF as the world’s largest by assets.
The design offered something mutual funds could not: intraday tradability. Unlike mutual funds, which are priced once after market close, ETFs trade on exchanges throughout the day at live market prices. Combined with lower expense ratios and full portfolio transparency, this structure gave investors a more flexible and cost-efficient vehicle for index exposure.
Despite the structural advantages, adoption remained limited through the 1990s. By 2000, ETF assets represented less than 1% of mutual fund assets globally. Growth accelerated only once the product expanded beyond equity index tracking.
Asset Class Expansion Drove Institutional and Retail Adoption
The critical inflection point came in the early 2000s, when ETFs began covering asset classes beyond equities. Bond ETFs arrived in 2002, commodity ETFs in 2004, and currency ETFs in 2005. Each expansion brought a new category of investors into the ETF market, particularly institutional allocators who needed efficient, exchange-traded access to fixed income and commodities.
Leveraged and inverse ETFs followed in 2006, introducing more sophisticated strategies into the exchange-traded structure. Thematic ETFs emerged in the following decade, covering sectors such as technology, healthcare, and clean energy, allowing investors to target specific investment themes without requiring deep sector expertise to select individual securities.
By the end of 2009, the number of ETFs had grown from one in 1993 to nearly 1,000. Assets under management for ETFs in the US alone approached $1 trillion. The global expansion of the ETF structure into European and Asian markets through the same period brought new investor bases into the ecosystem.
The Indian ETF Market: A Decade of Structural Growth
India’s ETF market launched in 2002 and has followed a trajectory that mirrors global adoption patterns, with growth concentrated in recent years. As of March 2026, Indian ETFs manage USD 119.8 billion across more than 300 products. Non-gold ETF AUM grew 14.8% over the past year and 84.7% over the previous three years.
Several structural factors drove this acceleration. Government-backed initiatives such as the CPSE ETF introduced passive investing to a broader investor base. The Employees’ Provident Fund Organization’s adoption of ETFs for equity investment brought institutional credibility and scale to the asset class. Meanwhile, growing cost awareness among investors has shifted preferences toward ETFs, which carry lower expense ratios than actively managed funds.
Retail participation has expanded significantly alongside institutional adoption. India’s NSE crossed 26 crore (260 million) trading accounts in June 2026. Individual investor holdings in NSE-listed companies grew at an annualized rate of 34.8% in the five years since the pandemic, with individuals now holding 18.7% of NSE-listed company market capitalization as of March 2026, the highest in 22 years. Retail and high-net-worth investors now hold around 25% of ETF AUM in India.
Despite this growth, Indian ETFs account for approximately 14% of total domestic fund assets, compared to 29% globally. This gap indicates meaningful room for further market development as investor awareness and product sophistication continue to expand.
Where the Indian ETF Market Stands Now
Product diversity within the Indian ETF market has increased alongside AUM growth. Core Nifty 50 and Sensex-tracking funds remain the largest by AUM, but investor interest has extended into thematic ETFs covering banking, IT, and digital economy themes, gold and silver commodity ETFs, smart beta strategies including momentum and low-volatility products, target maturity bond ETFs as alternatives to fixed maturity plans, and international ETFs providing exposure to global equity markets.
Active managers investing in large-cap Indian equities have found it increasingly difficult to generate consistent alpha above benchmarks, which has further strengthened the case for passive strategies among cost-conscious investors.
For IFAs managing HNI and UHNI portfolios, ETFs represent a precise and cost-efficient building block for multi-asset portfolio construction. EQBAC provides advisors with access to Indian and international ETFs alongside a broader universe of global investment instruments, all under a single regulated platform. Connect with EQBAC to explore how ETF-based strategies can be integrated into your clients’ portfolios efficiently and at scale.
