NFOs in January: Rush of thematic, factor-based and sector-specific funds; should you invest?

• NFOs rise with thematic, factor-based, and sector-specific funds leading launches
• 23 new open-ended funds launched in Dec 2025, raising Rs 4,074 crore
• Experts advise aligning NFO investments with financial goals and risk appetite

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New Fund Offers (NFOs) are back in the spotlight with thematic, factor-based and sector-specific funds dominating the list. While they present a wider choice, should you invest in an NFO just because it’s new?

“The surge in NFOs, as of January 2026, indicates a clear shift in the Indian mutual fund landscape. Strategies of asset management companies are moving away from broad category fillers,” said Anup Bhaiya, founder, Money Honey Financial Services. Fund houses are trying to capture investor appetite through thematic, factor-based (Smart Beta), and sector-specific products, he said.

According to the Association of Mutual Funds in India (AMFI), 23 new open-ended funds were launched in December, led by equity-oriented schemes, followed by hybrid schemes, raising Rs 4,074 crore. Overall, total inflows from NFOs for the calendar year 2025 stood at Rs 3.03 lakh crore.

The recent NFOs are mostly open-ended, allowing investors flexibility to buy or sell shares at the fund's current net asset value (NAV), without a cap on maturity or units. The latest NFOs seek to gather shareholders’ focus across thematic, factor-based (Smart Beta), and sector-specific funds.

Thematic funds offer exposure to infrastructure, defence, clean energy, digitalisation, and banking, to name a few. They are suited for investors who have a high risk appetite and can be explored on a limited basis with an allocation of 5-10 percent, say experts.

Thematic funds differ from sector-specific funds, as they invest across multiple sectors. Sectoral funds focus on a single industry. According to the latest AMFI data, there were 238 thematic (and sectoral) mutual funds with a total assets under management (AUM) of Rs 5.37 lakh crore as on December 31.

According to Bhaiya, four of the 11 listed NFOs in January focus on financial services or consumption. “AMCs are betting heavily on the structural India story. They are carving out niches within sectors, like services versus banking. There has also been a significant rise in Index Funds and ETFs (Axis, Groww, Kotak), as investors increasingly look for lower-cost ways to participate in the market without manager risk.”

Factor-based funds, or so-called smart beta funds, invest in stocks using certain pre-set filters or rules to build portfolios. They take into account factors such as value, growth, quality and momentum while making investment decisions.

Examples from the latest NFOs include funds like SBI Quality and Kotak Value. “It signifies that AMCs are moving beyond simple stock picking. They are now offering a rules-based strategy that targets specific traits like quality, low volatility, or value,” Bhaiya said.

Financial advisers suggest investors avoid short-term trends and align their investment with their financial goals, time horizon and risk appetite. Look for funds that offer controlled risk management when choosing NFOs, they say.