MFs collect Rs1.08 lakh cr via 176 NFOs in FY22

Factors resulted in a flurry of NFOs:

• Investor-friendly changes by Sebi & AMFI

• Investors need to improve income levels and also long-term investing

• Liquidity tightening

• Rise in interest rates

• Stock mkt consolidation in progress

• Return to work from office 

New Delhi: Riding on intense retail investors' interest and a sharp rally in equity markets, asset management companies (AMCs) launched 176 new fund offerings (NFOs) in 2021-22, garnering a whopping Rs1.08 lakh crore.

With liquidity tightening, interest rates on the rise, stock market consolidation in progress, return to work from office, there could be subdued interest in NFOs going forward. While fixed maturity plans (FMPs) category could see considerable launches, the same cannot be expected from other categories, Gopal Kavalireddi, Head of Research at FYERS, said.

Also, almost all AMCs have launched new schemes across most categories, thereby fillings the earlier existing product gaps that was created post-recategorization, he said. "Gaps in investment objectives, interest of investor in specific themes, availability of funds for deployment, credibility and reputation of fund managers, and performance of stock markets could dictate the quantum of new launches," he added.

According to the data compiled by Morningstar India, there were 176 new fund offers (including closed-end funds and ETFs) in 2021-22. These managed to collect a staggering Rs 1,07,896 crore during their inception stage. This was way higher than 84 NFOs floated in 2020-21 and cumulatively, these funds were able to mobilize Rs 42,038 crore.

Usually, NFOs come during a surging market when investor sentiment is high and optimistic. The stock market along with the positive investor sentiments kept surging post-March 2020, leading to the launch of higher number of NFOs. The NFOs were floated to capitalise on the mood of investors and attract their investment as they were willing to invest at that time.

Coincidentally, over the same period, the Indian capital markets Sebi along with Association of Mutual Funds of India (AMFI) brought in considerable investor-friendly changes which included exit-load removal, entry-load capping, categorization and reorganization of mutual fund schemes, direct plans, risk-o-meter, addition of new category, Flexicap, and other policies, thus ensuing investor awareness and bringing about clarity and transparency in investments.

With the need to improve income levels, and also with a view of long-term investing, along with measures taken by Sebi and Amfi resulted in a flurry of NFOs across many categories of mutual funds-- equity and debt alike, Kavalireddi said.

Most of the schemes were launched in the index and ETF category, to support both - passive and active investors. The maximum number of funds (49) were launched in the index fund segment, which amassed Rs 10,629 crore, followed by other ETFs (34), which collected Rs 7,619 crore and fixed-term plans (32), which mobilised Rs 5,751 crore.