Index Funds Hide Concentration Risk in India's Market

Index Funds Hide Concentration Risk in India's Market
India's passive investing boom has created a misleading illusion of diversification. While index funds promise broad market exposure, the reality reveals a stark concentration where a handful of mega-cap stocks and specific sectors drive the overwhelming majority of returns. This structural imbalance presents significant risks that retail investors often overlook when selecting passive investment vehicles. The Indian equity market, particularly indices like the Nifty 50 and Sensex, has become increasingly dominated by large-cap technology, financial services, and energy stocks. When investors buy index funds tracking these benchmarks, they believe they are spreading risk across numerous companies.