NFO launches rise in June, but mobilisation drops 52% amid volatility and product fatigue

According to the latest AMFI data, 20 new fund offers (NFOs) were launched in June—nearly triple April’s count of seven and slightly ahead of May’s 19 launches.

New mutual fund launches continued to rise in June, but investor enthusiasm failed to keep pace. Market volatility, high valuations, and a lack of compelling new themes weighed on investor sentiment, resulting in a sharp decline in fund mobilisation.

According to the latest AMFI data, 20 new fund offers (NFOs) were launched in June—nearly triple April’s count of seven and slightly ahead of May’s 19 launches. However, overall mobilisation dropped by 52% to Rs 1,986 crore from Rs 4,127 crore in May. The fall was steeper in equity funds, which raised just Rs 928 crore across four schemes in June, down from ₹2,732 crore raised by three schemes in May.

More Launches, But Fewer Flows

“The launch activity has actually picked up,” said Juzer Gabajiwala, Director at Ventura Securities. “When markets are buoyant, IPOs and NFOs both tend to increase. There has been reasonably good traction in launches.” He added that July has already seen 29 NFOs—14 closed and 15 currently active.

Yet, the pickup in launch activity hasn't translated into flows.

“Overall, industry NFO sales numbers have been coming down. Over the last six months, they’ve been slowing month-on-month,” said Akhil Chaturvedi, Chief Business Officer at Motilal Oswal AMC.

“This comes against the backdrop of extremely volatile markets and more subdued returns over the past year,” he added. “The mood is largely ‘wait and watch’.”

Bull Markets Bring Bigger NFOs

Chaturvedi noted that NFOs typically thrive during bullish phases. “Years like 2023–24 were great for NFOs. Even 2021 and 2017 were strong years. But every time we go through uncertain periods, new product launches tend to slow.”

This time around launches have not slowed, but mobilisations have. However, unless there’s clear investor demand, the product itself becomes irrelevant. “If you want to do an NFO with ₹100–300 crore, the product itself becomes irrelevant unless there’s genuine interest.”

With core categories like large cap, mid cap, flexi cap, small cap, and multi-cap already well covered, momentum thus far has come from thematic funds. But that appears to be losing steam now. Others agree. “The trend of returns has been muted, especially in thematic or sectoral funds that raised a lot of money recently,” said Abhishek Tiwari, Chief Business Officer at PGIM MF. “Volatility has increased across the market, and we’re seeing a shift back toward quality and growth-centric companies,” he added.

That being the case, unless something truly new comes up, there’s not much left to offer, according to Chaturvedi. “Recently, we may have done one or two themes we feel are relevant for the long term, but we know the response may be muted in this environment,” he says. Shweta Rajani, Head of Mutual Funds at Anand Rathi Wealth, also pointed to investor fatigue. “Investors are realising that new launches aren't offering anything fundamentally different.”

Hybrid Funds Gaining Ground

Tiwari noted a rising trend in hybrid strategies. “We’re seeing more investors move towards hybrid exposure. That part of the market is growing faster.” Hybrid NFOs raised ₹859 crore in May and ₹549 crore in March, though none were launched in June.

Meanwhile, newer AMCs like Samco and Unifi are entering with diversified or large-and-mid-cap offerings, seeking to fill remaining white spaces in the market.

The established players are focussing more on core strategies, which is keeping the net inflows positive. “We are still seeing inflows coming into the regular schemes.” Gabajiwala.

Net equity inflows rose to ₹23,568 crore in June, up from ₹18,994 crore in May—driven by strong interest in flexi cap, arbitrage, and large cap funds. Small- and mid-cap funds also drew significant flows.

On the debt side, activity remained subdued, except for some demand in tax-efficient products.