There is good news for the mutual funds industry. The equity new fund offering (NFO), which went out of vogue over the last couple of years, seems to have caught the attention of retail investors.

If assets garnered by the latest equity NFO from Axis Mutual Fund is anything to go by, this could be a signal that retail investors have started looking at investment in equity markets, though still cautiously. The NFO of the fund, named Axis Focused 25 Fund and launched on June 12, closed early this week. Karan Datta, national sales head at Axis MF, says, “The issue has garnered close to Rs 250 crore and it is all retail money with around 16,000 folios".

The asset allocation of the scheme will be such that the objective of the scheme for long-term appreciation will be met, through investments in a concentrated portfolio of equity and equity-related instruments of up to 25 companies.

The scheme will allocate 65 to 100 per cent of assets in equity and equity-related instruments of up to 25 companies, and zero to 35 per cent in debt and money-market instruments. The performance of the scheme will be standardised primarily against the S&P CNX Nifty and additionally against the BSE 200.

Prior to this, Axis had launched a Mid-cap fund in early 2011, which also received reasonable response, although lesser than its latest launch.

Interestingly, such huge interest in equity NFOs was last witnessed in September 2010, when the industry launched four equity NFOs — the highest in recent times. Of these, one was from IDBI MF and the remaining three from Reliance MF, which together had mobilised Rs 677 crore.

In between, Union KBC Equity Fund had raised Rs 167 crore in June 2011, while Sundaram Equity Plus mobilised Rs 134 crore in May 2011. But after that, as the stock markets turned highly volatile, only five equity NFOs hit the street, raising a mere Rs 71 crore.

In relative terms, Rs 250 crore is a large corpus and certainly a sentiment booster for Axis MF. Executives in other fund houses, too, appreciated the development and term it “a rare event" in the current tumultuous times. The height of desperation to garner assets is such among fund managers that they were relieved at the thought of fresh investment being made in the industry's equity segment.

But would it translate into more equity launches from the industry? In conversation with Business Standard, established brands in the fund market did not show the need to come up with new schemes, as their basket was already full. However, smaller and new entrants in the industry sounded cautious, considering the timing of their equity launches.

“We need to wait. In haste, it would not be helpful to launch new equity schemes. The Axis example may turn out to be an aberration, who knows?,"said the chief executive officer of a mid-sized fund house whose recent launches had miserably failed.

As on May 31, 2011, according to statistics from the Association of Mutual Funds in India, there were 352 equity-related schemes. Of these, 302 were pure diversified equity products, while the rest are equity-linked saving schemes. Equity assets comprised close to a fourth of the industry’s asset under management (AUM) at Rs 1,70,400 crore this May, against the industry’s total AUM of Rs 6,99,284 crore.