Mutual fund NAVs of most thematic, sectoral NFOs below issue prices: What should investors do now?
stock market. The net asset values (NAVs) of several funds launched recently have shed as much as 21% from their offer price of Rs.10 per unit.
Some of the most impacted have been the passive schemes based on defence, PSU, tourism and metal indices, and momentum based strategies. Their NAVs are between Rs.8 and Rs.9 now, indicating a 10-20% fall.
While the decline in defence and PSU stocks began in July, the drop precipitated from 27 September onwards when the broader sell-off commenced, triggered by strong foreign institutional outflows. During this period, the Nifty 50 fell 10.44%, the Nifty Midcap 150 fell 10.9%, while the Nifty Smallcap 250 fell 9.1%. The Defence index dropped 10.25%, the PSU index shed 11.7% and the Metal index has declined 12.28% since 27 September.
NFOs that have incurred losses
“While the pain has been felt across the board, it is more visible in some of the new fund offerings, especially index funds, which have been around popular themes with valuation concerns,” says Nirav Karkera, Head of Research, Fisdom.
Sectoral mutual funds have not been able to meet investor expectations as such funds attract most of the money when the sector is hot, rather than during periods of attractive opportunities, says Rajeev Thakkar of PPFAS Mutual Fund. “The investment outcome for investors has not been that great. Funds get launched and garner most of the money when the sector is ‘hot’ and do not get investments when the opportunities are really attractive. We have already seen some of the newer
