Equity NFOs revive with market rally

Grappling with waning interest in equities and falling collections, mutual fund houses are planning to ride the current market momentum in a bid to woo investors into equity schemes.

Equity new fund offers (NFOs), which had almost dried up after the global economic crisis began, are staging a comeback with at least a dozen offer documents piled up with the market regulator, Securities and Exchange Board of India (Sebi), for approval.

The NFOs lined up for approval include Reliance Target Appreciation Fund, Shinsei Industry Leaders Fund, DSP Blackrock World Energy Fund and Religare Business Leaders Fund. Fixed income is the only asset class where the money kept flowing in. However, with with economy and markets showing signs of optimism, AMCs are hopeful that they will be able to mobilise a decent amount of money. “It will not be the frenetic subscription levels of 2007 where retail investors rushed in the name of a NFO, but it will be much saner and probably long-term oriented too as market has just begun the rally,” said a mutual fund distributor.

Recently, ICICI Prudential launched Target Returns Fund with an eye on mopping up Rs 500 crore, while Edelweiss Mutual Fund has launched EDGE fund (Edelweiss Diversified growth equity fund). Reliance Mutual Fund is also close to launching its infrastructure scheme.

“There is a big gap on the equity side in terms of NFOs. There is a psychological reaction to NFOs as units are cheap. We are seeing equity inflows trickling in. It may be some more time before we see large inflows in equity but smart investors are cashing on the opportunity presented by markets and are investing,” said Anil Chopra, CEO, Bajaj Capital.

Benchmark indices have risen 17 per cent in last one month. “Even large stocks have fallen to a level where it has become easier for retail investors to participate. Those who are feeling left out in this rally will now participate giving fund managers some hope of receiving good collections in NFOs,” said a fund manager. “Investors have become more mature. From an investment perspective, obviously this is the right time. But, a lot of people might be choosing established funds over new ones,” said Sundeep Sikka, CEO, Reliance Capital Asset Management.