Small-cap to Smart Beta: Diversified Mix of New Funds Hits the Market in March

Market Update: NFOs Amid War-Induced Volatility

Key Points:

• 14 new fund offerings (NFOs) launched in India from February to early March 2026.
• 240 thematic and sectoral mutual funds with a total Rs 5,237.43 lakh crore assets under management (AUM) as of January 31, 2026.
• 5-10% allocation recommended for thematic, factor-based, and arbitrage funds.

NFO Landscape:

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The ongoing conflict in West Asia has led to a surge in factor-based, arbitrage-oriented, thematic, and sectoral NFOs. These new fund offers aim to attract investors with innovative strategies, themes, or niche opportunities across equity, debt, hybrid, and sectoral categories.

Investment Strategies:

• Arbitrage funds: Invest in stocks to profit from price discrepancies.
• Factor-based funds: Invest in stocks using pre-set filters or rules to build portfolios.
• Thematic funds: Invest across multiple sectors.

Risk Management:

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Investors can consider allocating 5-10% of their portfolio to thematic, factor-based, and arbitrage funds. These NFOs provide a strategic clean slate for investors, allowing fund managers to deploy fresh capital into the current correction and pick up quality stocks at distressed prices.

Asset Allocation:

Diversifying into gold and energy or commodities can provide an organic hedge against pure equity funds. Funds like Capitalmind Multi Asset Allocation and Motilal Oswal Multi Factor Passive FoF are designed for volatility and offer a disciplined way to move from 'panic' to 'process'.