Is it true that Vanguard Fund has been investing heavily into the Indian stock markets?

Vanguard Group, founded by Jack Bogle, has emerged as one of the most formidable passive funds asset manager in the world with assets under management or AUM of over $4.5 trillion. Globally, it is the second largest mutual fund in terms of AUM after Blackrock. It has been reported that Vanguard has pumped in at least Rs.2,660 crore into the Indian Equity markets through its Vanguard Emerging Market Stock Index Fund.

The particular index fund picked has up shares of at least 26 companies, largely as part of its index rebalancing exercise which is normally necessitated when the weightages of an MSCI index are modified, when new shares are added to the index or when existing share are removed from the index. However, it must be remembered that Vanguard Index Fund is a passive fund and not an active stock selection fund. Hence there is no stock selection.

The key stocks purchased by Vanguard in the week gone by include such names like Tata Chemicals, Honeywell Automation and IIFL Finance. Most experts have contended that the buying would have been triggered by the FTSE rebalancing, which has just happened. Interestingly, in the last few years, passive index funds have managed to outperform the active funds even as fund managers have struggled to beat the index.