Mutual funds raise Rs 1.18 trn via NFOs in 2024; thematic funds lead

Asset management companies launched 239 new fund offerings (NFOs) mobilising Rs 1.18 trillion in 2024, with sectoral or thematic equity funds emerging as the top choice of investors, according to a report by Germinate Investor Services Research.

This was higher than 212 NFOs collecting Rs 63,854 crore in 2023 and 228 NFOs garnering Rs 62,187 crore in 2022. 

 

The NFO landscape expanded from 81 offerings in 2020 to 239 in 2024, besides, the funds raised through the space more than doubled from Rs 53,703 crore in 2020. The trend suggests a strong growth trajectory and heightened investor confidence.

 

Usually, NFOs come during a surging market when investor sentiments are high and optimistic. The NFOs were floated to capitalise on the mood of investors and attract their investment as they were willing to invest at that time.

Industry experts said the stock market performance along with the positive investor sentiments led to higher fund mobilisation through NFOs in 2024.

In the entire 2024, Sensex jumped 5,898.75 points or 8.16 per cent, and the Nifty surged 1,913.4 points or 8.80 per cent.

Overall, thematic/sectoral funds, index funds and exchange traded funds (ETFs) captured significant investor interest.

"With 53 NFOs raising Rs 79,109 crore, these funds emerged as the top choice for investors," the report said.

Tailored to specific sectors or themes, sectoral or thematic equity funds resonated with investors for their focused approach and alignment with market trends. Notable examples include funds targeting sectors like manufacturing, technology, and ESG (Environmental, Social, and Governance) themes.

Individually, HDFC Manufacturing Fund NFO led the pack, with a record inflow of Rs 12,500 crore in April 2024.

In terms of month, the highest number of NFO launches was recorded in December, marking a strong year-end momentum.

Going ahead, the report said the mutual fund industry is likely to face a recalibration in 2025 after the strong gains of recent years.

"While extraordinary returns may not sustain, the focus will shift to ensuring stability, maintaining liquidity, and achieving reasonable returns in line with market trends. Investors must adapt to a more balanced approach, safeguarding capital while managing expectations. This calls for strategies that align with changing market dynamics and ensure a steady performance even in uncertain times," it added.