Expensive valuations, stock market volatility hit NFO inflows in 2Q13.

Asset management firms raised Rs 17,805 crore through 67 new fund offers (NFOs) in September 2022, down 64 percent from the previous period, due to expensive valuations and high volatility in equity markets.

However, sequential performance was much better. The first quarter (April-June) of the current fiscal saw only four NFOs, raising a total of Rs 3,307 crore, according to data compiled by Morningstar India.

There was a lull in the NFO space in the first quarter due to Sebi’s restrictions on launching new schemes.

Generally, NFOs enter the market for various reasons, such as asset management companies (AMCs) who consider that there was a gap in their product offering and they want to build access to various market segments through specific strategies.

According to Morningstar India, there were 67 new fund offerings in the second quarter of 2022-2023. Collectively, they were able to raise Rs 17,805 crore through NFOs.

In comparison, 43 NFOs were floated in July-September 2021 and together these funds were able to raise Rs 49,283 crore.

Manish P Hingar, founder of Fintoo, attributes the lower fundraising to an expensive valuation.

“Today, the market is at a higher level and is a bit expensive. Therefore, investors are hesitant to enter the market. This is why you may find less volume acquired in the current quarter,” he said. said.

Another factor could be high volatility in stock markets, said Abhishek Dev, CEO and co-founder of Epsilon Money Mart.

Even though new funds launched were less in the quarter under review compared to the previous year, liquidity and appetite were better during that time, he added.

In the July-September 2021 quarter, fundamentals were improving and sentiments were positive, leading markets to rally.

“However, the course of the market has changed in recent seasons, it is more volatile due to the geographical crisis and concerns due to high inflation and interest rate increases. This is clearly reflected in the total flow of funds in mutual funds as well as investments in NFO,” he says. Feroze Azeez, Deputy Director, Anand Rathi Wealth said.

In the three months ending September 2022, as many as 67 NFOs were launched compared to just four in the previous quarter.

The insignificant releases were due to restrictions imposed by the Securities and Exchange Board of India (Sebi).

In April, the regulator banned funds from launching new schemes until the industry met its standards on the pooling of investors’ funds with intermediaries and distributors. The deadline to implement the new guideline was July 1.

Also, the regulator had asked mutual fund companies to implement guidelines like double authentication for redemption and account origin verification while making mutual fund investments. These measures were aimed at protecting the interests of investors and increasing investor confidence in mutual fund investments.

The largest number of schemes this quarter was launched in other schemes category-30, which included 17 other ETFs and 11 index funds. The other schemes collected Rs 915 crore.

Additionally, investors were attracted to debt funds with AMCs launching 23 schemes to raise Rs 6,432 crore and 10 equity funds being floated and raising Rs 8,898 crore.

Within the equity sector, Flexicaps funds witnessed strong interest from asset management companies.

Last year many Multicap funds were NFOs as this was a newly formed category and many AMCs had this gap in their portfolio.

In 2021-22, AMCs launched 176 new mutual fund schemes raising Rs 1.08 lakh crore. In 2020-21, 84 NFOs were floated and collectively these funds were able to raise Rs 42,038 crore.

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