Expensive valuations, volatility in equity market hit NFO inflows in Sept quarter
ASSET management companies mobilised Rs 17,805 crore through 67 new fund offerings (NFOs) in the September 2022 quarter, a 64 per cent decline from the year-ago period, on expensive valuations and high volatility in equity markets.
However, sequentially performance was much better. The first quarter (April-June) of the current fiscal saw only four NFOs, garnering a total of Rs 3,307 crore, according to data compiled by Morningstar India. There was a lull in the NFO space in the first quarter due to SEBI’s restrictions on launching new schemes.
Generally, NFOs hit markets due to several reasons, like asset management companies (AMCs) considering that there was a gap in their product offerings, and they want to build access to various market scenarios using particular strategies. According to Morningstar India, the second quarter of 2022-23 saw 67 new fund offerings. Cumulatively, they were able to garner Rs 17,805 crore through the NFOs. In comparison, 43 NFOs floated in July-September 2021, and together these funds were able to mobilise Rs 49,283 crore.
Manish P Hingar, Founder of Fintoo, attributed the lower fund mobilisation to expensive valuations.
“Today, the market is trading at a higher level and is a bit expensive. As a result of that, investors are currently hesitant to enter the market. This is the reason why you may find less amount mobilised in the current quarter,” he said.
Another factor could be high volatility in the equity markets, Abhishek Dev, CEO and co-founder of Epsilon Money Mart, said. Even though new funds launched were less in the quarter under review compared to the year-ago period, liquidity and appetite were better that time, he added.
During the July-September quarter of 2021, fundamentals were improving, resulting in markets heading up.
“However, market dynamics have changed in last few quarters, it is more volatile due to geopolitical crisis and concerns over high inflation and rate hikes. This is reflecting in overall fund flows in MFs as well as investments in NFOs,” Feroze Azeez, Deputy CEO of Anand Rathi Wealth, said.