Active equity NFO collection at a 6-year low in the first half of CY26

Money raised through active equity mutual fund (MF) launches plunged to a six-year low in the first half of calendar year 2026 (H1CY26), as volatile markets dampened investor interest and tighter regulations weighed on the ability of fund houses to launch new funds.

 

The slowdown though is not limited to active equity funds. Overall, new fund offering (NFO) collections across equity, debt, hybrid, passive and fund of funds categories fell to a 10-year low at ₹13,040 crore in H1CY26.

 

Fund houses launched 23 active equity schemes during January-June 2026 (H1CY26), but these raised a combined ₹7,092 crore — the lowest NFO collection in a half-yearly period since the Covid-19 disruption in H1CY2020. In the year-ago period, fund houses raised a total of ₹10,690 crore through the launch of 25 active equity schemes.

 

NFO activity is closely linked to equity market sentiment, with fund houses typically launching more sche­mes during bull markets. Equity NFOs and collections, which had peaked in 2024, have slowed down in the past 18 months as the recurrent market volatility has hit investor sentiments. Geopolitical tensions in West Asia further dampened investor sentiment this year.

 

Along with subdued equity market sentiment, MF officials attribute the slowdown to structural factors such as most AMCs having completed their active equity product bouquet and tighter regulatory norms for sectoral and thematic funds. 

 

“Most fund houses have largely completed their active equity product bouquet. As a result, most launches are now happening in the passive space, while active equity launches are largely coming from newer AMCs (asset management companies). Regulatory changes, including the tightening of norms for sectoral and thematic fund launches, may also have had some impact,” said Jimmy Patel, managing director at Quantum AMC.

 

Sunil Subramaniam, founder and  chief executive officer of financial literacy platform Sense and Simplicity, also shares a similar view. “Most fund houses have simply run out of empty slots to launch schemes. Sectoral and thematic funds are the only categories that allows multiple launches, and AMCs had used them aggressively in recent years. Thematic fatigue has set in among distributors and retail investors alike. Amid geopolitical events and macroeconomic pressures, the appetite for fresh, unproven thematic allocations has sharply corrected,” he said.

 

Meanwhile, at ₹13,040 crore through 89 new launches, half-yearly collections were the lowest since the second half of 2016. However, NFO mobilisation in the pre-Covid period was largely driven by fixed maturity plans (FMPs), with institutional money flowing into new schemes as existing schemes matured.

 

NFOs have been a key source of active equity inflows for fund houses in the post-Covid period. The NFO collections contributed over 20 per cent of the net equity inflows in each calendar year from 2021 to 2024. The NFO share was over one fourth in most months during the equity bull market period in May-September 2024, the period marked by a record number of fund launches in the sectoral and thematic space. In 2024, the industry launched 52 thematic and sectoral funds, which together collected nearly ₹80,000 crore.

 

Recent regulatory changes have made fund launches in the sectoral and thematic space difficult. Under the revised scheme categorisation norms announced by market regulator Securities and Exchange Board of India (Sebi) in February, sectoral and thematic funds within the same fund house cannot have more than 50 per cent portfolio overlap.

 

The overlap norm followed a series of measures introduced by Sebi in 2025 to tighten the NFO framework. These included removing the higher commission incentive for distributors to switch investors from existing schemes into NFOs and requiring fund houses to invest NFO proceeds within a prescribed period, reducing the scope for opportunistic launches.

 

“Post 2021, thematic launches saw heavy distributor push and retail FOMO (fear of missing out). The exuberance has waned in the last year or so, largely owing to underperformance in several thematic funds and tighter regulatory norms,” said Anup Bhaiya, founder, Money Honey Wealth Services.