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In the last six months, 61 NFO schemes have mobilised INR 27,333 crores during a phase when markets were already bullish. NFOs are expected to be launched by fund houses during times when investor sentiments are at their peak however another reason for the launch of an NFO is believed to be with the goal that fund houses can complete their product bouquet.

New Fund Offers (NFOs) Mobilise Large Proportion of Funds in the Equity Markets

*Source: AMFI

The largest collection was done in December 2020 when 14 schemes were launched, the highest since October 2020. January 2021 to May 2021 collectively saw 47 NFOs being launched collecting INR 18,295 crore, out of which the lowest collections took place in April 2021 despite 6 NFOs being launched. The reason for this was the second wave of the COVID 19 due to which investor sentiments were negatively impacted and investing activity declined on account of COVID driven fear and volatility in the markets.

Fund collections on account of NFOs in May 2021 were 295.5x higher as compared to the same period last year and as compared to April 2021 there was a 10.9x increase in funds mobilised as investor confidence improved on account of the second wave of COVID coming under control as case counts steadily reduced and signs of economic recovery were starting to become visible.

Going forward, buoyancy is likely to continue in the markets and fund houses are likely to focus on more innovative and thematic products such as ESG funds. This is because as per the 2017 circular release by the Securities and Exchange Board of India on categorization and rationalization of mutual funds, under each category fund houses are allowed to have only 1 scheme to avoid confusion in the minds of investors and most fund houses already have schemes operational in prominent categories.