Germinate Investor Services LLP

**Foreword**

As we step into a new chapter of India's economic journey, it is with great optimism that we present the "NFO Landscape - 2024: Emerging Trends, Performance Insights, and Market Dynamics." This report is a reflection of the dynamic and evolving nature of India's financial ecosystem, one that continues to present opportunities for investors seeking long-term growth.
The Indian equity markets have shown remarkable resilience and adaptability, driven by strong macroeconomic fundamentals and a burgeoning entrepreneurial spirit. The year 2024, marked by pivotal events such as the general elections, brings with it renewed energy and potential for transformational growth. A stable and reform-oriented governance framework is expected to catalyze investments, stimulate economic activity, and pave the way for sustained development across industries.
New Fund Offerings (NFOs) have emerged as a cornerstone of the mutual fund industry's evolution, reflecting not only the ingenuity of fund managers but also the growing sophistication of retail and institutional investors. This report delves into the trends that shaped NFO inflows in 2024, highlighting sectoral outperformance, investor preferences, and the strategic pivots of fund houses in response to market dynamics.
India’s growth story remains a compelling narrative, underpinned by its demographic dividend, digital transformation, and ambitious projects. As the world increasingly recognizes India's pivotal role in the global economy, the equity markets are poised to ride this wave of optimism. Investors have a unique opportunity to participate in this journey, leveraging insights and data to make informed decisions.
At Germinate Investor Services, we believe that knowledge is the cornerstone of successful investing. This report is crafted with the intention of empowering our readers to navigate the complexities of the financial markets with confidence and clarity.
Let us embrace the opportunities that lie ahead, investing not just in financial assets but in the limitless potential of India's future.
Santosh Joseph, CEO - Germinate Investor Services

Looking Back, Moving Forward

Our Perspective and Insights

2024: A Banner Year for Mutual Funds

Equity markets experienced a significant upswing in 2024, marking one of the strongest performances in recent years. This positive momentum had a ripple effect on mutual funds, making it a standout year for this investment avenue. Retail investors demonstrated heightened enthusiasm, as reflected in the substantial inflow of investments and the remarkable growth in Assets Under Management (AUM). The introduction of innovative schemes further energized the sector, solidifying mutual funds as a favored choice for individual investors seeking diverse financial instruments.

**A Record Year for NFOs**

The mutual fund industry shattered records in 2024 with the launch of over 200 new schemes. The surge in NFOs reached peaks in September and October, coinciding with a market rally. These months alone accounted for more than 50 new fund launches, amassing over ₹20,000 crores in investor contributions.
On a broader scale, the industry collected over ₹1,00,000 crores through NFOs in 2024, reflecting both investor confidence and the sustained appetite for new investment products. July was particularly noteworthy, with collections exceeding ₹16,500 crores, driven by market optimism and aggressive fund marketing. Conversely, April saw the lowest collections of just over ₹1,500 crores, likely influenced by market volatility and cautious sentiment.

NFO Launched in 2024 - Scheme wise & Month wise

Sectoral and Thematic Funds Dominate the Launchpad

The year 2024 was characterized by the emergence of sectoral and thematic funds as the predominant choice for New Fund Offerings (NFOs). These funds, tailored to specific sectors or thematic strategies, resonated with investors due to their focused approach and alignment with market trends. Examples include funds targeting sectors such as manufacturing, technology, or themes like ESG (Environmental, Social, and Governance).

Thematic funds allowed investors to capitalize on growth narratives within select industries or macroeconomic themes, while sectoral funds offered the opportunity to ride industry-specific cycles. With over 90% of new collections focused on thematic and Smart Beta funds (including ETFs and index funds), this trend underscored a shift toward targeted and innovative investment strategies.

Overall, thematic funds, ETFs, and index funds contributed to an impressive 188 out of 239 NFOs launched during the year. Established AMCs leveraged their credibility and expertise to roll out these funds, capitalizing on their ease of approval and appeal to investors. By offering differentiated and innovative products, thematic funds allowed AMCs to address market demands and regulatory requirements effectively.

Multi-Asset Funds Gain Traction

In a year marked by market volatility, multi-asset funds emerged as a robust investment choice. These funds provide a diversified portfolio that includes gold, international equities, domestic equities, and fixed income, making them an attractive option for risk-averse investors seeking balanced returns.

The unique ability of multi-asset funds to hedge against market downturns while offering exposure to multiple asset classes resonated strongly with investors. Both new and existing multi-asset funds experienced steady inflows, highlighting their growing acceptance as a viable diversification strategy in unpredictable market conditions.

Thematic Funds: A Key Driver of Growth

Thematic funds led the charge in 2024, capturing investor attention with their compelling narratives and potential for high returns. Manufacturing funds were especially notable, attracting over ₹7,000 crores in April, the highest AUM mobilized for a thematic fund during an NFO collection.

New Players Drive Growth in Diversified Equity

The diversified equity category saw renewed vigor, thanks to new players entering the market with innovative fund offerings. This category, encompassing multi-cap and flexi-cap funds, appealed to investors looking for exposure to a wide array of equities without being constrained by market-cap restrictions.

While established AMCs focused on thematic funds, ETFs, and index funds to fill gaps in their offerings, new fund houses took a bolder approach by introducing diversified equity baskets. This trend not only broadened the range of investment options but also fostered healthy competition within the industry, ultimately benefiting investors with enhanced product diversity and innovation.

Outlook for 2025

The mutual fund industry is likely to face a recalibration in 2025 after the strong gains of recent years. While extraordinary returns may not sustain, the focus will shift to ensuring stability, maintaining liquidity, and achieving reasonable returns in line with market trends. Investors must adapt to a more balanced approach, safeguarding capital while managing expectations. This calls for strategies that align with changing market dynamics and ensure a steady performance even in uncertain times.

Hybrid and multi-asset funds are expected to lead the way, offering the flexibility to navigate diverse asset classes and create well-diversified portfolios. These funds help mitigate risks and enable investors to remain committed for the long term without chasing individual themes. Additionally, trends such as thematic funds targeting green energy and digital transformation, the growth of ETFs and Smart Beta strategies, and diversified options like multi-cap funds will shape the industry's future. A forward-looking, strategic approach emphasizing diversification and alignment with macroeconomic themes will be crucial for investors aiming to capitalize on emerging opportunities in the year ahead

The information in this report is for general informational purposes only and does not constitute investment advice. Investments in securities markets are subject to market risks. Past performance is not indicative of future results. Investors should evaluate strategies independently and consult financial advisors if needed. For the full disclaimer, visit www.germinateinvestor.com/disclaimer

NFO Landscape - 2024