Given the intense interest of retail investors and the sharp rise in the equity market, the asset management company (AMC) launched 176 new fund offerings (NFOs) in 2021-22, earning Rs 1.08 lakh crore.
With liquidity tightening, rising interest rates, stock market consolidation underway, returning to work from the office, weak interest in NFOs is likely to occur in the future. While the fixed maturity plan (FMP) category could see many launches, the same cannot be expected from other categories, said Gopal Kavalireddi, Head of Research at FYERS.
In addition, almost all AMCs have launched new schemes across most categories, thus filling the gap of previously existing products created after recategorization, he said.
“Gaps in investment objectives, investor interest in specific themes, availability of funds for use, the credibility and reputation of fund managers, and stock market performance can determine the number of new launches,” he said.
According to data collected by Morningstar India, there will be 176 new fund offerings (including closed-end funds and ETFs) in 2021-22. This managed to raise a staggering Rs 1,07,896 crore during their initial stage.
This is much higher than the 84 floating NFOs in 2020-21 and cumulatively, the fund is able to raise Rs 42,038 crore.
Typically, NFOs come during a soaring market when investor sentiment is high and optimistic. The stock market along with positive investor sentiment continued to soar after March 2020, leading to the launch of a higher number of NFOs.
NFOs are floated to capitalize on investors ’moods and attract their investments because they are willing to invest at the time.
Coincidentally, during the same period, the Securities and Exchange Board of India (SEBI) of the Indian capital market along with the Association of Mutual Funds of India (AMFI) brought about considerable investor-friendly changes including removal of out-of-load, limitation of entry-load, categorization and restructuring of mutual fund schemes, direct plans, risk-o-meters, addition of new categories, Flexicap, and other policies, further creating investor awareness and creating clarity and transparency in investments.
With the need to raise income levels, as well as with a view for long-term investment, along with measures taken by SEBI and AMFI resulted in NFO unrest across many categories of mutual funds– equity and debt alike, Mr Kavalireddi said.
Most of the schemes have been launched in the index and ETF categories, to support both – passive and active investors.