Equity NFO pipeline remains strong despite equity market weakness

The equity market’s recent downturn appears unlikely to slow the brisk pace of mutual fund (MF) scheme launches, at least in the coming weeks.

 

Last month, fund houses introduced 21 new equity schemes, with another five launches already lined up for November.

 

The number of filing with markets regulator, Securities and Exchange Board of India (Sebi), suggests this momentum will continue with

 

asset management companies (AMCs) seeking approval for 21 more equity schemes in October.

 

The calendar year 2024 has seen a surge in fund launches, buoyed by an overall robust market rally and heightened investor interest in thematic and sector-focused funds. Since January, AMCs have introduced 135 equity schemes, both active and passive, outpacing the 88 launches recorded in 2023.

 

Despite potential headwinds in the equity market, MF executives are undeterred, viewing the launch of new funds as a strategy to diversify offerings amid intensified competition in the passive space. 

 

“The market condition does make a difference in terms of demand for NFOs. We have to put in more effort when there is nervousness in the market. However, this is not the case right now,” says Akhil Chaturvedi, executive director and chief business officer of Motilal Oswal. “The market has corrected somewhat, but sentiment hasn’t taken a big hit.”

 

According to Chaturvedi, the firm is seeing long-term wealth-generation opportunities across various sectors over the next 5–10 years. “We are looking at high-growth themes in India for the next decade.  The changing economic landscape is providing a lot of structural growth stories and opening up new thematic investment opportunities,” he explains.

 

Motilal Oswal has recently launched several sectoral and thematic schemes with a focus on mid- and small-cap companies.

 

At least five equity NFOs will open for subscription in November, according to data from Value Research.  Among them are Nippon India’s Nifty Realty index fund and Nifty Auto index fund, PGIM India’s active health-care fund, Tata MF’s innovation fund, and Shriram AMC’s multi-sector rotation fund.

 

For Abhishek Tiwari, executive director and chief business officer at PGIM India MF, a thoughtful approach to new fund offerings is key. While the fund house is careful not to launch funds that could yield a volatile experience for investors, it sees its new health-care focused thematic fund as a prudent defensive play in the current climate.

 

“We don’t believe in launching funds when they are in fashion. We prioritise segments that can be relevant at all points in time. Historically, health care has often proved to be a defensive theme but with many legs of growth. We believe health care is getting redefined as a space for consumers and definitely investors,” Tiwari adds.