Fund houses queue up to launch equity schemes on market rally

The primary market may not have seen any revival in fortunes. But mutual funds (MFs) are cashing in on the strong rally in the markets. Fund houses have filed offer documents with market regulator Sebi to launch as many as 15 equity schemes since the beginning of 2015.

ICICI Prudential, Reliance, UTI, SBI and DSP BlackRock are among the fund houses that are planning to launch new equity schemes.

Equity NFOs (new fund offers), which gained momentum after the general election results delivered the strongest mandate in three decades, have mobilised nearly $1 billion (Rs.5880 crore) in the last three months alone (November 2014 and January 2015), data with the Association of Mutual Funds in India ( AMFI) showed.

The amount mobilised by fund houses through equity NFOs is the highest in nearly six years during December and January. The NFO space had seen virtually no action ever since the markets tanked following the global financial crisis.

In fact, there were no equity NFOs in seven months during 2013. There were no new equity launches for five consecutive months starting June in 2013. The revival in NFOs started only in June last year when fund houses mobilised Rs. 1114 crore during the month.

"NFO launches have gone up as the overall environment has improved," says Himanshu Vyapak, deputy CEO, Reliance Capital Asset Management. "The positive mood is back. Retail interest in equity MFs has gone up significantly in the last few months," says Raghav Iyengar, executive vice president, ICICI Prudential MF.

Interestingly, themes that are in vogue are also being favoured by fund houses in NFO launches. For instance, ICICI Prudential has filed offer documents for launching 'Manufacture in India' fund taking a leaf out of the government's 'Make in India'.

Similarly, Pramerica MF is planning to launch a 'Build in India' fund as well as an 'E-commerce fund' to cash in on the booming e-commerce market in the country. "New themes can be captured effectively through NFOs," Raghav says.

Despite the growing interest, equity NFOs are nowhere near the size and scale seen in early 2008 when fund houses made huge mobilisations on the back of surging markets. Fund houses collected a whopping Rs. 23824 crore from equity NFOs in January-March 2008, AMFI data showed.

"Most money is coming into open-ended schemes. People would invest in NFOs only if you have a different theme," Vyapak says. "Big retail money is not coming into NFOs," senior industry officials say. Only about 15% of the money collected by fund houses in the equity category has come to NFOs, says a top industry official.