Mutual funds' NFO collection shrinks in 2025 as equity appetite cools

Mutual funds launched 222 NFOs and raised ₹63,631 crore in 2025 (as of November), down sharply from 2024, as active equity demand softened amid volatile markets

Mutual funds (MFs) maintained their fund-launch pace in 2025, but investor demand weakened as volatile equity markets dampened appetite for new schemes. The industry has raised ₹63,631 crore through 222 total new fund offerings (NFOs) in 2025 (as of November), sharply lower than the nearly ₹1.2 trillion collected through 239 NFOs in 2024. 

The decline is largely driven by a slump in active equity NFO collections. As of November, 51 launches in 2025 in the equity segment collected ₹29,148 crore. In the previous year, 69 NFOs had garnered over ₹91,000 crore. 

NFO collections, according to experts, are largely linked to equity market sentiment. Most high-grossing NFOs, especially after the debt fund tax change, have been in the equity space. 

As a result, the share of active equity schemes in NFO collection has gone up in recent years. 

Their share in total NFO collections, which stood at around 50 per cent in 2021 and 2022, surged for the next two consecutive years. In 2024, it stood at 77 per cent. 

However, this year, the share is back to less than 50 per cent as hybrid and passive schemes have seen higher investor interest. 

“The NFO line up this year is different compared to 2024. Active equity schemes, which generally garner higher sums, have been comparatively lower. The launches and the collections are generally higher during bull market phases when investor appetite is higher,” said Rushabh Desai, founder, Rupee With Rushabh Investment Services. Sunil Subramaniam, a former MF executive and founder and chief executive officer (CEO) of Sense and Simplicity, said the decline can also be attributed to the comparatively lower launches by large asset management companies (AMCs). 

“In 2024, few NFOs from large AMCs like HDFC and State Bank of India (SBI) alone brought in a large amount of money. This year, newer AMCs have been at the forefront,” he said. 

“In addition, usage of the thematic window by fund houses to launch ‘sliced and diced’ offerings such as innovation, multi-factor and active momentum haven't found wider investor acceptance this year,” he added. 

Other factors are also at play. The surge in fund launches —particularly in high-risk thematic strategies — prompted regulatory tightening by the Securities and Exchange Board of India (Sebi) earlier in 2025. 

From April 1, Sebi implemented two key measures: distributors are no longer allowed to earn higher commissions by switching investors’ money from existing schemes to NFOs. 

AMCs are required to deploy NFO proceeds within a defined timeline, aligning launches more closely with market conditions and stated asset-allocation mandates.