The moderation in new fund launches this year, compared to CY 2024, could be due to the equity markets being relatively flat for the last 12 months, with increased volatility in the last few months, said Suresh Soni, CEO, Baroda BNP Paribas Mutual Fund.
“We may see the number of new funds, especially from older fund houses, taper off as they have completed the themes and strategies that they wanted to offer to investors,” he said.In the entire year, 2024 witnessed 81 equity new fund offers (NFOs) led by thematic funds, collectively garnering ₹94,548 crore, riding the bullish wave in the stock market till September.
Mutual funds raised record money from investors through new fund offers (NFOs) in segments like defence, tourism, capital markets, energy, manufacturing, innovation, transportation and logistics, automotive, internet economy, realty, and many others. As regulations prevent fund houses from operating more than one scheme in each equity category, the industry has found a way around the rule by launching schemes based on various themes. Moreover, various mutual funds launched schemes to reward distributors, who often push investors to shift from products that investors held for a while to new equity funds that charge higher fees.
AgenciesWith returns of many sectoral and thematic funds swinging wildly after the sell-off between October and March and the subsequent rebound, investors have been unnerved by the volatility, resulting in their demand for new products going down.Sandeep Bagla, CEO of Trust MF, attributed the fall in NFOs to geopolitical challenges in the first half of this year. “The markets had turned volatile at the beginning of the year, which dented investor sentiment for some time. Also, slowing growth and Trump tariffs slowed the flows down a bit.”In January-March of 2025, mutual funds saw 20 schemes raise ₹7,853 crore, while April-June saw nine schemes collect ₹4,690 crore. Muted returns have also made fund houses hesitant to launch new schemes. According to Value Research, the large-cap equity funds category delivered only 5% returns in the first six months of 2025, while the large-and-mid-cap category returned just 1%.
Bagla said investor interest is likely to revive soon with newer mutual funds starting operations.
“There will a spate of sectoral and thematic fund launches by newer mutual funds,” he said. “However, I expect the current year’s mobilisation numbers to be a tad less than last year’s as the current equity performance is not as strong as last year’s.”
