NFOs set to achieve new records this year

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This year marks a significant milestone as, for the first time in three decades, the number of equity and hybrid NFOs has surpassed the 100-mark annually between 2021 and 2023, based on data from Value Research. This trend underscores the dynamism and expansion within the private sector mutual funds, which began operations in November 1993.

According to Financial Express, in the past three years, mutual fund houses have been consistently launching 10-12 equity new fund offers (NFOs) every month. This trend seems to be continuing unabated, as indicated by the number of NFOs launched this year, 67 new schemes have been introduced this year, suggesting a growing momentum. Around half of these schemes are actively managed.

The introduction of new indices by both the BSE (Bombay Stock Exchange) and the National Stock Exchange (NSE) has played a significant role in facilitating the creation of exchange-traded funds (ETFs) by fund houses. These new indices provide diversified benchmarks that reflect various segments of the market, enabling fund managers to develop ETFs tailored to specific investment themes or strategies.

In the financial market where there is a significant surge in the small-cap and mid-cap segments. These segments represent companies with relatively smaller market capitalizations compared to large-cap companies. Although, such rapid growth might concern regulators due to potential risks associated with investing in smaller companies, it has attracted a considerable number of investors. Fund houses, which manage investment funds, have noticed this trend and are witnessing a surge in demand for funds targeting small-cap and mid-cap companies. To meet this demand and capitalize on the opportunity, both existing and new fund houses are actively launching schemes tailored to invest in these segments.

Companies like Groww, Canara Robeco, Bandhan MF, JM Financial, WhiteOak Capital, and Motilal Oswal, are aggressively rolling out such schemes. As they aim to cater to investors’ growing interest in these segments and ensure they don’t lose out on potential business opportunities.

What are NFOs?

NFO, or New Fund Offer, marks the initial stage of a mutual fund scheme when it is introduced to the market and investors, the mutual fund scheme is open for subscription, and investors have the opportunity to purchase units directly from the fund house. The NFO period typically has a specific duration, during which investors can invest in the scheme at the initial offer price. Once the NFO period ends, the mutual fund scheme transitions into its regular phase, and units can be bought and sold on the secondary market at the prevailing net asset value (NAV).