Active Investing vs Passive Investing

This research paper provides a comparative analysis of active and passive investment strategies across three major sectors of the Indian equity market: Pharmaceuticals, FMCG (Fast-Moving Consumer Goods), and Banking. Using quantitative methods and secondary data collected from mutual fund NAVs and benchmark indices between 2023 and 2025, the study evaluates fund performance across key financial metrics including CAGR, Sharpe Ratio, Treynor Ratio, Standard Deviation, Beta, Alpha, and Tracking Error. The findings reveal that passive funds significantly outperformed in the Pharma sector due to strong sector-wide tailwinds, while active funds held a marginal advantage in FMCG in terms of raw returns but underperformed on efficiency metrics. In the Banking sector, select active funds generated substantial alpha through tactical stock selection and allocation shifts, although passive funds maintained strong consistency and cost-effectiveness.