NFO Update: Motilal Oswal Mutual Fund launches services fund

resr 5paisa Research Team

Last Updated: 20th May 2025 - 05:28 pm

2 min read

Motilal Oswal Mutual Fund is launching a new sectoral fund called the Motilal Oswal Services Fund, an open-ended equity scheme focused on companies primarily earning from the services sector. The fund aims to generate long-term capital appreciation by investing across market capitalizations in businesses offering services such as finance, IT, telecom, healthcare, and more. Being a thematic fund, it provides an opportunity for investors to tap into India's growing services-driven economy. However, like all market-linked products, the scheme’s success depends on market conditions and sector performance, and returns are not guaranteed.

Key Features of Motilal Oswal Services Fund

  • NFO Open Date: 20th May 2025
  • NFO Close Date: 3rd June 2025
  • Exit Load: 1% if redeemed within 90 days from the allotment date & Nil if redeemed after 90 days

Objective of Motilal Oswal Services Fund

The primary objective of the Motilal Oswal Services Fund - Direct (G) is to generate long-term capital appreciation by investing in equity or equity related instruments across market capitalization of companies derive the majority of their income from business in the Services sector of the economy.

However, there can be no assurance that the investment objective of the Motilal Oswal Services Fund - Direct (G) will be realized.

Investment Strategy of Motilal Oswal Services Fund

  • Focuses on equity and equity-related investments in companies deriving major income from India’s services sector.
  • Covers a wide range of sub-sectors including IT, BPO, Financial Services, Healthcare, Education, Media, Telecom, Utilities, and Logistics.
  • Active management strategy using both bottom-up stock picking and top-down sector allocation.
  • Aims to build a high-conviction, high-quality, and high-growth portfolio with long-term capital appreciation.
  • Up to 20% flexibility to invest outside the services sector, based on prevailing economic and market conditions.

Risks Associated with Motilal Oswal Services Fund

  • Sectoral concentration risk: Returns are dependent on the performance of the servicmutuales sector, ignoring manufacturing cycles.
  • May underperform broader markets during phases where manufacturing or cyclical sectors outperform.
  • Market risk in equities and equity-related instruments due to economic volatility, policy changes, and global influences.
  • Interest rate risk due to exposure to money market instruments — NAV may fluctuate based on rate changes.
  • Liquidity and credit risk associated with fixed income and debt instruments, especially during market stress.

Risk Mitigation Strategy by Motilal Oswal Services Fund

  • Liquidity Risk: The scheme aims to maintain a prudent asset-liability match to ensure timely redemptions and reduce exposure to illiquid stocks.
  • Derivatives Risk: Use of derivatives (Index Options/Futures) will be exchange-traded only, monitored via front-office systems, and aligned with SEBI regulations. No OTC contracts.
  • Interest Rate & Credit Risk: Investments in shorter maturity money market instruments help reduce volatility and credit risk. The AMC applies management analysis to assess issuer creditworthiness and default risk.
  • Sectoral Allocation Monitoring: Diversified allocation within various sub-sectors of services helps balance sectoral risks.

What Type of Investor Should Invest in Motilal Oswal Services Fund?

  • Investors with a long-term investment horizon seeking capital appreciation through sector-focused strategies.
  • Those who have high conviction in the growth potential of India’s services economy — IT, finance, healthcare, education, telecom, etc.
  • Suitable for moderate to high-risk investors comfortable with thematic/sectoral equity exposure.
  • Investors aiming to diversify their portfolio with a specialized strategy focused on services, rather than broader market exposure.
  • Ideal for those who understand the cyclical nature of sectoral funds and are prepared for short- to medium-term volatility.
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