3-month SEBI ban no deterrent to NFO mop-up

Mutual funds have managed to raise ₹32,789 crore through new fund offers (NFOs) in last eight months of this year against ₹60,366 crore logged in the same period last year despite the market regulator banning NFO launches for three months in June quarter.

Catering to the growing demand, mutual funds had launched 114 NFOs in last eight months against 84 recorded in the same period last year.

The mutual fund industry crossed the half-way mark of fund-raise through NFOs compared with last year as most investors used the uncertain bull run in equity markets to book profit and plough it back partially in the new offers.

Earlier, the Securities and Exchange Board of India (SEBI), in an unprecedented move, banned NFOs between April and June to make the industry comply with its direction to discontinue distributors and brokers investment in mutual fund from their pool account.

The industry registered the highest mop-up of ₹13,275 crore in March backed by the multi-cap NFO of SBI Mutual Fund which attracted an investment of ₹8,170 crore and 15 index funds raising ₹3,596 crore.

Last month, investors pumped in ₹7,985 crore in 37 NFOs with flexi-cap offer of Baroda BNP Paribas and WhiteOak Capital getting ₹1,962 crore investment.

Sanjay Lad, an independent mutual fund distributor, said with no large initial public offer in recent past, investors who had booked profit from equity markets were open to consider NFOs — especially that of flexi and small cap funds.

The fund-raise through NFO in September will also be good, he added.

Hybrid and debt categories

Among the hybrid category, Mirae Asset Balanced Advantage Fund had received an investment of ₹746 crore, while NJ Arbitrage Fund got ₹10 crore as this category of fund has seen a net outflow of ₹21,627 crore in last eight months due to poor returns from this category over last one year.

With the opening up of NFO market, the number of new systematic investment plan (SIP) registered saw a jump of 21 per cent in August to 21.13 lakh against 17.42 lakh in July.

Interestingly, 13 debt fund NFOs had raised ₹3,885 crore despite higher interest rate taking sheen off the debt market.

Global factors

Pankaj Pathak, Fund Manager-Fixed Income, Quantum Mutual Fund, said though the domestic environment has improved, the external environment has turned more hostile to the Indian bond markets. The US Fed may continue to rise rates for long period while European Central Bank, Bank of Canada, and Bank of England have also expressed a hawkish commentary.

While the interest rate on bank saving accounts are not likely to increase soon, investing in liquid funds looks more attractive as the returns are already increasing, said Pathak.

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