Thematic Funds propel Calendar 2024 NFO flows to ₹1.19 Trillion

13 Jan 2025 , 01:50 PM

NFOS TURN AROUND IN 2025; BUT STILL LED BY THEMATIC FUNDS

As calendar 2024 concluded, the one thing that stood out amidst the market volatility was the success of primary offers. Here we are not referring to the equity IPOs, which did have a bumper year in 2024. We are referring to the new fund offerings (NFOs) of mutual funds, which saw a sharp revival in the year 2024. After two tepid years of NFO collections in 2022 and in 2023, the year 2024 was a welcome change. Just look at the numbers.

There were a total of 238 NFOs in the year 2024, which collected a total of ₹1,18,519 Crore from investors. This is sharply higher than the NFO collections of ₹63,854 Crore recorded in calendar year 2023. However, if one looks at the break-up of the category of NFOs, year 2024 appears to have been totally dominated by the thematic funds. The trend was roughly similar in 2023 too, but the domination of thematic funds in NFOs of 2024 is much sharper. Let us start with a quick recap of NFO flows in year 2023.

RECAP 2023 – NFO STORY REMAINED SUBDUED FOR THE YEAR

NFO flows were relatively tepid in the year 2023, as can be seen from the table below. This is despite the fact that year 2023 was a year of stellar returns on the Nifty and Sensex.

Calendar 2023	No. of NFOs	Generic Equity MF	Thematic Funds	Flexi Caps	Index Funds	Index ETFs	Close End FTPs	Hybrid Funds	Income Funds	Monthly NFO Flow
Jan-23	18	0	0	1,204	420	27	851	1,572	348	4,422
Feb-23	27	0	2,540	2,508	863	30	954	292	0	7,187
Mar-23	45	6	3,835	0	634	181	3,878	0	30	8,564
Apr-23	9	0	1,612	0	34	10	0	101	71	1,828
May-23	5	0	174	0	142	0	103	64	0	483
Jun-23	11	101	2,717	220	63	15	0	112	0	3,228
Jul-23	17	0	1,540	1,471	176	122	0	0	3,414	6,723
Aug-23	15	0	2,556	2,446	31	63	188	2,247	0	7,531
Sep-23	16	0	1,629	874	6	53	0	5,233	0	7,795
Oct-23	14	1,103	918	975	71	346	0	199	26	3,638
Nov-23	14	41	1,342	551	96	10	447	96	0	2,583
Dec-23	21	2,062	4,259	0	167	64	2,060	1,260	0	9,872
CY23 Total	212	3,313	23,122	10,249	2,703	921	8,481	11,176	3,889	63,854
Share		5.19%	36.21%	16.05%	4.23%	1.44%	13.28%	17.50%	6.09%	100.00%

Data Source: AMFI (₹ in crore, except number of NFOs; share in %)

What did we read from the NFO numbers. Here are some key takeaways.

• In year 2023, total NFO collections of ₹63,854 Crore across 212 NFOs translated into a monthly average of ₹5,322 Crore in NFO flows in for the year.
• For calendar 2023, the NFO flows were evenly spread through the year with the first half accounting for 40.3% of the NFO collections and the second half accounting for 59.7%.
• Out of the total yearly NFO collections of ₹63,854 Crore in year 2023, thematic funds again dominated collections with 36.21% share of NFO fund raising. However, there were other significant double-digit contributions from hybrid funds, flexi-cap funds, and closed-ended fixed term plans (FTP).

Year 2023 was not much better than 2022 in terms of NFO flows. However, the thematic funds showed the first signs of a sharp revival in terms of investor interest.

CALENDAR 2024 SHOWS  SHARP SURGE IN NFO FLOWS

Year 2024, not only had a promising start, but also lived up to its promise with collections of close to ₹1.19 Trillion. Here is a quick look at the Calendar 2024 NFO numbers.

Fiscal Year FY25	No. of NFOs	Generic Equity MF	Thematic Funds	Flexi Caps	Index Funds	Index ETFs	Close End FTPs	Hybrid Funds	Income Funds	Monthly NFO Flow
Jan-24	20	0	284	683	976	243	384	4,247	0	6,817
Feb-24	22	1,514	7,178	0	696	582	251	1,499	0	11,720
Mar-24	21	0	3,074	0	178	70	319	396	109	4,146
Apr-24	9	0	707	512	269	0	0	44	0	1,532
May-24	9	0	9,563	0	242	72	0	263	0	10,140
Jun-24	17	345	12,974	1,051	39	48	0	770	0	15,227
Jul-24	15	0	9,790	3,945	2,651	179	0	0	0	16,565
Aug-24	18	865	10,202	0	771	113	0	1,297	567	13,815
Sep-24	27	1,734	7,842	297	3,656	102	0	872	72	14,575
Oct-24	29	180	3,517	350	1,895	136	0	0	0	6,078
Nov-24	18	358	2,751	0	523	11	0	140	269	4,052
Dec-24	33	0	11,337	65	1,361	19	209	788	73	13,852
CY24 Total	238	4,996	79,219	6,903	13,257	1,575	1,163	10,316	1,090	1,18,519
Share		4.22%	66.84%	5.82%	11.19%	1.33%	0.98%	8.70%	0.92%	100.00%

Data Source: AMFI (₹ in crore, except number of NFOs; share in %)

Here is what we read into the month-wise and the product wise break-up of NFO flows into mutual funds for year 2024.

• Total NFO collections of ₹1,18,519 Crore across 238 NFOs is sharply higher than last 2 calendar years. That translates into average monthly NFO flows of ₹9,877 Crore. Despite volatile markets, 7 out of the 12 months in 2024 saw NFO inflows of over ₹10,000
• Out of the total collections of ₹1,18,519 Crore in year 2024, thematic funds dominated with collections of ₹79,219 Crore; or 66.8%. This is sharply higher than the thematic NFO share of 36.2% in the previous year. That does create a peak euphoria risk.
• Apart from thematic funds, the only other category to corner more than 10% share of NFO flows in 2024 was index funds at 11.2%. Clearly, post the modified tax rules of the full budget in July 2024, debt fund and hybrid fund NFOs have taken a sharp hit.

The surge in NFOs in year 2024 is a good sign. However, the sheer dominance of thematic funds at 66.8% of NFOs is hardly a good sign. Thematic IPOs at higher levels of a market have often been a recipe for sustained losses. That is something SEBI and AMFI must watch out for!