Change in commission structure, market volatility weigh on equity NFOs

Sebi, in a circular dated October 22, introduced a slew of changes aimed at bringing transparency in expenses

The scrapping of upfront commission already seems to be making a dent on the collection momentum of equity new fund offers (NFOs). In November, newly launched open-ended equity schemes saw collection of Rs 11.72 billion, which was 55 per cent lower than previous month. 

According to industry sources, upfront commissions to distributors were one of the reasons that led to higher collections during the NFOs. 

Experts say collections are expected to remain lower in the near-term as large distributors such as banks will have to relook at their business models, following the Securities and Exchange Board of India’s (Sebi’s) decision