Passive index funds and actively managed funds compete for the same allocation to equities of Indian investors, but studies about which provides better return relative to its risk and cost have been inconclusive. In this paper, 19 active large-cap funds have been compared with 16 Nifty 50 index funds (total of 35 schemes) using the secondary data from factsheets for the period 2020-2026. Return analysis (trailing 1, 3 and 5 years and since launch returns and calendar year return in 2021 due to the recovery post-COVID, the 2022 Russia-Ukraine war and the 2024 AI-induced rally), expense ratio, tracking error, beta, Sharpe ratio, Treynor ratio and Jensen’s alpha have been analyzed using Welch’s t-test, Mann-Whitney U test and within-fund-house pair-wise test. Actively managed funds achieved superior trailing returns in all periods (with mean differences of 3.79, 2.88 and 2.01 percentage points at 1, 3 and 5 years respectively, all p < 0.001) and positive mean alpha (1.41% vs -1.52%) while passive funds showed better Sharpe ratios (0.27 vs -0.05). Passive funds outperformed in 2021 and partially in 2022 while active funds performed better in 2024. The actively managed funds were costly by 0.58 percentage points on average (0.72% vs 0.14%). Neither approach predominates across all measures considered. The findings are based on observations, limited in duration and partially inconsistent in the method of calculations for the different fund categories, so they should not be taken to provide causation.

Keywords: Active investing; Passive investing; Mutual equity funds; Risk and return; Sharpe ratio; Jensen’s alpha; Expense ratio; Tracking error; India