The NFO
trends of 2024 highlight a significant inclination towards sector-specific
funds, passive investments, and hybrid strategies. These trends align with
broader market themes of investor caution amid global uncertainty, coupled with
optimism for India’s growth sectors. The
mutual fund industry introduced 200+ schemes in 2024, raising
substantial capital. With ₹110,897 crore
raised across multiple categories, the NFO activity provides key insights into
investor behaviour and fund house strategies. This essay delves into the NFO
trends, category-wise performance, and future opportunities in the mutual fund
industry. The data analysis throws light that the fund houses have been strategically
introducing schemes to cater to evolving investor preferences, market
conditions, and regulatory landscapes.
Key Highlights of the NFO
Market in 2024
- Dominance
of Sectoral and Thematic Funds
- Schemes:
40
- Amount
Collected: ₹67,772 crore
- Rise
of Index Funds
- Schemes:
76 (Highest number of schemes launched)
- Amount
Collected: ₹11,896 crore
- Interest
in Multi-Asset Allocation Funds
- Schemes:
8
- Amount
Collected: ₹7,435 crore
- Significance
of Multi-Cap Funds
- Schemes:
5
- Amount
Collected: ₹6,326 crore
- Steady
Inflows into Dynamic Asset Allocation/ Balanced Advantage Funds
- Schemes:
3
- Amount
Collected: ₹1,598 crore
- ETFs
Gaining Traction
- Other
ETFs collected ₹1,438 crore across 41 schemes.
- Gold
ETFs, while limited to 3 schemes, attracted ₹70 crore.
- Analysis:
- Moderate
Interest in Small and Focused Funds
- Small
Cap Funds: ₹703 crore from 2 schemes.
- Focused
Funds: ₹110 crore from 1 scheme.
- Limited
Launch of Duration Funds
- Long
Duration Funds: ₹109 crore from 2 schemes.
- Medium
to Long Duration Funds: ₹72 crore from 1 scheme.
- Retirement
and Dividend Yield Funds
- Retirement
Funds: ₹307 crore from 2 schemes.
- Dividend
Yield Funds: ₹1,006 crore from 1 scheme.
From the investor's
angle, we find a significant preference and shift towards Passive Investing. The strong performance of
index funds and ETFs highlights a growing trend towards passive strategies,
driven by cost efficiency, ease of access, and increasing availability of such
products in the market. On the other hand
Sectoral Focus we find that Defence, Manufacturing had significant
demand. The prominence of sectoral and thematic funds shows that investors are
looking for concentrated exposure to growth sectors, likely driven by policy
tailwinds and macroeconomic shifts.
Conclusion
Fund managers and investors should align their strategies with these emerging preferences for optimal outcomes. Index funds' growth indicates a shift towards passive investing due to lower costs and increased investor awareness. The trend aligns with global practices where passive funds have outpaced active funds in popularity.
Investors might be leveraging index funds to gain diversified exposure to
benchmark indices, reducing individual stock-picking risks. The ETF segment
continues to grow as investors look for cost-efficient, transparent, and liquid
investment avenues. Gold ETFs’ modest inflows reflect cautious optimism toward
gold as a hedge against inflation. The market and investor preferences and choices are creating opportunities for NFO innovations.
The AMC industry will evolve more with the new Rs 10 lakh product which will throw light for more innovation. If sensex will be 2lakhs by 20230 then the product basket for investments has to be innovative and new theme-based products will find huge growth in the coming days. We will find more hunger for innovative products and innovative combinations of themes. But we need to avoid over lapping in allocation and do more research in small caps to find out future Midcaps and large caps where the growth will match with 7 trillion Indian GDP
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