With equity markets remaining highly volatile, mutual fund houses have turned more conservative on launching new fund offers (NFOs).
As a result, the sectoral and thematic mutual fund category—once among the most popular for new launches and investor inflows—saw no active NFOs in the first quarter of FY27, according to data from the Association of Mutual Funds in India (Amfi). This is the first such instance in nearly five years, since the second quarter of FY21.
The slowdown marks a sharp reversal from the fourth quarter of FY26, when 12 sectoral and thematic schemes were launched, mobilising Rs 5,330 crore, or about half of the total funds raised through NFOs during the quarter.
The absence of launches also weighed on overall fund mobilisation. Mutual funds collected just Rs 460 crore through NFOs in June, the lowest monthly mobilisation since April 2025. NFO collections have declined for the fourth consecutive month from Rs 3,985 crore in March 2026. Only seven schemes were launched in June, the fewest since April 2025.
Industry executives attributed the slowdown to a combination of product saturation, regulatory changes and evolving market conditions.
Ovais Bakshi, national head of alliances and retail sales at Kotak Mahindra AMC, said fund houses typically launch sectoral and thematic funds as satellite allocation products. “Once AMCs complete their bouquet of sector- and theme-based offerings, the pace of launches naturally slows,” he said, adding that the fund house would introduce new schemes only when it identifies a compelling investment opportunity.
Aditya Agarwal, co-founder of Wealthy.in, said the lack of launches reflects a shift from launching products based on prevailing investor trends to adopting a more sustainable, investor-centric approach.
While established fund houses already have a wide range of sectoral and thematic offerings, newer entrants have also stayed away from launching active schemes in the category.
Anupam Tiwari, head of equity at Groww Mutual Fund, said newer fund houses are prioritising products that form the core of investors’ portfolios. As a result, sectoral and thematic funds, which are typically used as satellite allocations, have taken a back seat.
Although active launches have dried up, fund houses continue to introduce passive sectoral and thematic products.
Anand Radhakrishnan, managing director and chief executive officer of Sundaram Mutual Fund, said Sebi’s regulations limiting portfolio overlap between sectoral and thematic funds and other equity schemes to less than 50 per cent have made fund houses more cautious about launching new active products in the category.
He said existing sectoral and thematic schemes are likely to continue attracting inflows, but future launches could increasingly be passive unless fund houses can build sufficiently differentiated portfolios.
Tiwari said Groww Mutual Fund has restricted itself to launching passive products in the category because many sectors and themes have a limited universe of listed stocks, making it difficult for active managers to meaningfully differentiate their portfolios.
Agarwal said the current market environment also favours passive products for thematic exposure because they offer lower costs, greater transparency and rule-based participation in well-defined investment themes.
He added that active launches have slowed because sectors such as manufacturing, defence, public sector undertakings, infrastructure and technology have undergone significant valuation corrections, reducing the scope for differentiated active strategies. The presence of well-established schemes in these segments has further limited the need for new offerings.
Tiwari said the decline also reflects the challenge of raising fresh money amid heightened market volatility following the West Asia conflict. Most inflows in recent months have come from existing investors through systematic investment plans (SIPs), he said. Given the significant marketing and distribution costs involved, launching a new scheme during periods of elevated volatility becomes less attractive for fund houses.
