Mutual Funds Experience Fourfold Surge In NFO Collections, Reaching Rs 22,000 Cr in Q2

Mutual funds witnessed a substantial surge, nearly quadrupling to Rs 22,000 crore in the July-September period of the current fiscal year, compared to the previous quarter. This increase was attributed to the launch of 48 new schemes in the market. Gopal Kavalireddi, Vice President of Research at FYERS, anticipates a continued influx of new fund offerings (NFOs) in the upcoming quarters as more Asset Management Companies (AMCs) become operational and introduce various products to cater to equity and debt investors. 

Kavalireddi highlights the optimistic investor sentiment toward India's growth story and the increasing interest in organised sectors, leading companies to seek funds through primary and secondary market offerings. The quarter ending in September 2023 saw the launch of 48 schemes, collectively amassing Rs 22,049 crore during the NFO period, a substantial increase from the 25 NFOs that raised Rs 5,539 crore in the June quarter. 

Typically, NFOs emerge during bullish market phases, capitalizing on positive investor sentiments. Feroze Azeez, Deputy CEO of Anand Rathi Wealth, attributes the significant NFO inflow to the overall positive sentiment toward equities, reflected in increased Systematic Investment Plan (SIP) flows and total mutual fund flows reaching Rs 80,000 crore since the beginning of the year.

Additionally, the heightened risk appetite for financial assets, particularly equities, prompts AMCs to introduce fresh offerings. The consolidation of existing AMCs and the entry of new asset management companies further contribute to expanded product offerings. Sectoral funds, thematic or sector funds, and multi-asset allocation funds are gaining popularity among retail investors due to their potential for high returns during periods of economic growth. 

The sectoral category witnessed the launch of the highest number of schemes (13), followed by 12 other Exchange Traded Funds (ETFs). In terms of fund collection, the sectoral category led with Rs 5,725 crore, followed by multi-asset allocation funds (Rs 4,791 crore), multi-cap funds (Rs 3,277 crore), and liquid funds (Rs 3,083 crore). Noteworthy NFOs during the quarter include ICICI Pru Innovation Fund, Baroda BNP Paribas Value, Bajaj Finserv Flexi Cap, HDFC Defence Fund, and HSBC Consumption Fund. 

Despite the surge in NFOs, investors are advised to exercise caution and avoid rushing into NFOs without a track record, as the newly launched funds lack performance history and offer no additional benefits during the waiting period.