Motilal Oswal Quality Fund NFO: What investors should know about the new quality-focused equity scheme

Motilal Oswal Mutual Fund has launched the Motilal Oswal Quality Fund, an open-ended equity scheme that follows the Quality Factor theme. The New Fund Offer (NFO), which opened on August 28, will remain open for subscription until September 11, 2026. The scheme is categorised as an equity thematic-factor-based fund and will benchmark its performance against the Nifty 200 Quality 30 Total Return Index. The fund aims to provide medium- to long-term capital appreciation by investing primarily in large- and mid-cap companies that meet its quality-focused investment criteria.

Focus on business quality

The fund’s investment approach centres on identifying companies with high return on equity (ROE), high return on capital employed (ROCE), low leverage and consistent earnings across economic cycles.

Beyond these financial metrics, the strategy looks for businesses that generate strong free cash flow and demonstrate capital discipline. Corporate governance and durable competitive advantages are also key considerations in the portfolio construction process.

The fund house says it is looking for businesses with a sustainable competitive moat, which could arise from factors such as scale, brand strength or cost advantages.

Focused portfolio

According to the fund house, the scheme will follow a focused approach, with a portfolio of 20-35 stocks. The portfolio will be actively monitored, with an exit discipline forming part of the investment strategy.

The quality framework is intended to favour businesses that can maintain relatively stable earnings rather than those whose performance is heavily dependent on a particular stage of the economic cycle.

Motilal Oswal Mutual Fund describes quality investing as an approach designed around businesses that can potentially offer greater resilience across economic environments. The fund house says 97.8% of rolling three-year periods between FY06 and FY26 delivered positive returns for the Quality Index, based on its cited historical data. It cautions, however, that past performance may not be sustained.

Minimum investment and risk

The minimum application amount during the NFO and on an ongoing basis is ₹500, with additional investments allowed in multiples of ₹1. The scheme offers both Regular and Direct plans, with Growth and Income Distribution cum Capital Withdrawal (IDCW) options.

Investors can also use flexible SIP options, with the frequency and date subject to the scheme documents.

The scheme carries a Very High risk classification, reflecting the risks associated with equity investing and its thematic-factor-based approach.

Exit load

Investors redeeming their units on or before 90 days from the date of allotment will be charged an exit load of 1%. No exit load is applicable if units are redeemed after 90 days, subject to the scheme’s stated load structure.

As an open-ended equity scheme, the fund is intended for investors with a medium- to long-term investment horizon who are comfortable with equity-market volatility and the risks associated with a focused quality-factor strategy.