A slew of new fund offers – time to take a deep look

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Even as the primary market is buzzing with activity, mutual fund is not far behind, thanks to a vibrant secondary market. With most benchmarks from BSE Sensex and NSE Nifty50 to SmallCap/MidCap hitting new highs, fund houses are launching new products to capitalise on the momentum across sectors, themes and market-capitalisation.

For instance, Tata Mutual has launched six mutual funds – Tata Nifty 500 Multicap 50:30:20 Infrastructure Index Fund, Tata Nifty MidSmall Healthcare Index Fund, Tata Nifty Realty Index Fund, Tata Nifty Financial Services Index Fund, Tata Nifty Auto Index Fund and Tata Nifty 500 Multicap India Manufacturing 50:30:20 Index Fund.

As the names suggest, the fund house is targeting various sectors, and across market-cap.

Plethora of offers

Similarly, Bandhan Innovation Fund will invest 80-100 per cent in equity and equity-related instruments following the innovation theme, 0-20 per cent in equity and equity-related securities other than following the innovation theme and overseas securities, 0-20 per cent in debt securities and money market instruments (including government securities, securitised debt), and 0-10 per cent in units issued by REITs & InvITs.

Last month, Baroda BNP Paribas, too, launched Innovation Fund. Others included Canara Robeco Manufacturing Fund; Edelweiss Technology Fund; Kotak Technology Fund; Union Business Cycle Fund; Motilal Oswal Nifty Realty ETF; Motilal Oswal Nifty Smallcap 250 ETF; HDFC Nifty Realty Index Fund; ICICI Prudential Nifty LargeMidcap 250 Index Fund; and Navi Nifty IT Index Fund.

Besides, several fund houses such as Motilal Oswal (MidSmall Financial Services Index Fund, MidSmall Healthcare Index Fund, MidSmall IT and Telecom Index Fund, MidSmall India Consumption Index Fund and Motilal Oswal Quant Fund); DSP Mutual Fund (Bank Index Fund); Bandhan (Nifty 500 Value 50 Index Fund); Sundaram Mutual Fund (Business Cycle Fund); Groww (Nifty Non-Cyclical Consumer Index); and Mahindra Manulife (Build India Fund) have filed their draft papers (scheme information document) with SEBI.

According to AMFI data, 56 schemes were launched in Q1 of 2024 by fund houses, which included gold (Tata Gold Exchange Traded Fund); silver (Tata Silver Exchange Traded Fund); and multi-asset allocation (Bandhan Multi Asset Allocation Fund; Mirae Asset Multi Asset Allocation Fund; and Sundaram Multi Asset Allocation Fund).

Relatively new players such as Groww, Zerodha, Navi and WhiteOak are also very active in launching new schemes.      

With so much frenzy, it would be difficult even for fund houses to manage large flows at a time when almost all the indices are creating new peaks on almost daily basis. In fact, HDFC Mutual Fund — which launched Realty Index Fund between March 7 and 21 — had discontinued fresh subscriptions and capped systematic investment plans (SIPs) within a few days. The fund reopened for ongoing subscriptions and redemptions from April 2 but in a release on April 1, it stated that with effect from April 8, fresh lump-sum investments, including additional purchases and switch-ins, will be discontinued in HDFC Nifty Realty Index Fund.

Tata MF puts it rightly saying the decision to introduce these funds is backed by rising income levels and compelling consumer trends.

Word of caution

Investors should keep in mind that investing through NFO poses the same risk as directly entering stock markets. It may be noted that theme-based funds that invest in a particular sector are riskier than diversified mutual funds. When the going is good, a sector fund may give high returns, but may suffer if any headwinds hurt that sector.

So, investors should assess the risk associated with every scheme, especially when the market is scaling new records. A word of advice from sound SEBI-approved financial advisors will make a huge difference.