Equity funds are back on the radar after a long period of lull with quite a few fund houses launching equity new fund offers in the past few weeks. Among the larger fund houses, Reliance MF’s Reliance Close-Ended Equity Fund Series A, which comes with a five-year lock-in period, opened for subscription on November 15.

ICICI MF’s ICICI Prudential Value Fund Series 2 opened for subscription on Monday and has a three-year lock-in. The new fund offerings (NFOs) of both these fund houses close on November 29. Pramerica Mutual Fund has launched an open-ended equity fund Pramerica Midcap Opportunities Fund while Axis Mutual Fund has launched a five-year close ended equity fund Axis Small Cap Fund.

The NFOs of these funds are currently open for subscription and close on November 25.

According to market participants, it’s been well over a year since more than two equity fund houses have come out with equity fund offerings in a span of a few weeks. ?Fund houses may believe that valuations in certain market segments look attractive at this point in time and it is prudent to invest at current levels. Also, the benchmark BSE Sensex’s rise to 21,000 levels recently may have given the fund houses the confidence that they can raise money now,? said Vicky Mehta, senior research analyst, Morningstar India.

Fund houses are confident of getting a good response from investors despite the sustained volatility in the market and the fear that tapering of quantitative easing in the US could lead to downside for emerging markets such as India.

?We believe there are enough good quality companies with proven track records that are available at attractive valuations. We expect these stocks to generate relatively strong returns over medium to long term,? said Sundeep Sikka, CEO, Reliance Capital Asset Management. According to Mehta, the NFO collections would depend on the marketing clout and distribution networks of the individual fund houses and their ability to convince investors.

Interestingly, the equity funds of four out of the five fund houses launched recently are close-ended in nature, meaning the investment will have a minimum lock-in period. ?We have noticed the investment trend of the investors have become very short over the period of time. Such schemes (close-ended) help investors to stay invested for a long term which will help them capitalize better returns from the equity market. The scheme is focused to provide capital appreciation to investors for long term wealth creation,? said Sikka.

Some industry observers, however, said the fund houses had chosen to make these schemes close-ended not only to prevent a sudden outflow of money from these schemes but also to ensure a sufficiently high payment of commission to distributors, who were primarily responsible for pushing these schemes to investors. Upfront commission for close-ended equity schemes can be as high as 6-7% compared with 1-2% for open-ended equity schemes.

The number of equity NFOs has been declining steadily, with just 17 NFOs being launched in 2011 and 2012. This is much less than the 89 NFOs that were launched at the height of the NFO boom in 2007 and 2008. Till October 2013, nine equity NFOs have been launched. Equity schemes have seen consistent outflows in the last two years, with net outflows totalling over R10,000 crore in calendar year 2013. The going has been particularly tough after the entry load ban was enforced in August 2009.