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Unfazed NFOs: No election jitters for mutual fund scheme launches

Fund houses to provide better entry points after June 4

Mutual Funds

Mutual Funds

Abhishek Kumar Mumbai

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New fund offers (NFOs) launched by domestic mutual funds have remained largely unaffected by the election-induced volatility. However, some fund houses expect better buying opportunities after the announcement of the election results on June 4.

At present, five active equity and hybrid new fund offerings (NFOs) — SBI Automotive Opportunities Fund, Samco Special Opportunities Fund, WhiteOak Capital Special Opportunities Fund, Bajaj Finserv Multi Asset Allocation Fund, and Baroda BNP Paribas Retirement Fund — are open for subscription.

The deployment, which happens after the completion of the NFO period, will mostly happen after the announcement of general election results for the majority of the new funds. In addition, four passive equity offerings are also open for subscription.

SBI MF and Samco MF said they chose to launch their schemes closer to the election results expecting to get better entry points.

“The perceived uncertainty in investors' minds will be completed on June 4. Whatever happens in the market post that will be a short-term thing. However, investors will benefit from both scenarios. If the rally happens, we will be able to immediately participate in it. In case there is a correction, we will be able to deploy the corpus at better valuations,” said D P Singh, Deputy MD and Joint CEO, SBI MF.

Fund launches in the equity and hybrid space gained pace in the second half of the financial year FY24 as the bull run in the equity markets have gained momentum.

The launches in the equity, hybrid, and passive space have surged to 80 in H2 FY 2024 compared to 47 in the previous six months, according to data from the Association of Mutual Funds in India (Amfi).

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The launches have been higher on the passive side as most larger fund houses already have completed their active equity and hybrid product bouquet. Most fund houses only have scope for new active fund launches in the thematic space.

In line with the trend seen in previous election seasons, the equity market has been volatile in recent weeks even as the expectations of the re-election of the BJP-led government remained strong.

Since April 1, the market has gained or fallen by 0.75 per cent on eight occasions. After dropping to an all-time low, India Vix has more than doubled in the past fortnight.

“As long as BJP wins a majority of seats in the Lok Sabha again, we think markets should still view the outcome of India’s General Elections positively over time. There could be modest knee-jerk weakness in INR FX and risk assets if BJP loses some seats and maintains a majority. However, we think this weakness should reverse over time as there will still be policy continuity in crucial areas such as infrastructure, investment attraction, fiscal consolidation, and inflation management in such a scenario,” Japan's MUFG said in a recent report.

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First Published: May 16 2024 | 8:36 PM IST

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