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The sharp slowdown followed weak sentiments in the equity market during the preceding quarter. The BSE Sensex had fallen nearly 16% to 71,947 by the end of March, amid escalating geo-political tensions in West Asia. Retail investors often take cues from recent market performance while making investments. Although market sentiment improved in the June quarter, with the Sensex rising nearly 5% to 76,479 by the end of June, the recovery did little to revive NFO fundraising.

Read more:FIIs increase PSU exposure, trim stakes in private banks"NFO activity is closely linked to market sentiment and performance. During rising markets, positive returns tend to improve investor confidence, encouraging AMCs to launch more new schemes and attracting greater retail participation," Rishi Kohli, chief investment officer, Jio BlackRock Asset Management told ET, adding that the impact of market conditions is not uniform across all NFOs. Schemes launched by established AMCs and managed by fund managers with a proven track record, or NFOs offering product differentiation can continue to attract investor interest even during volatile periods.

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Mohanty expects SIP inflow to strengthen further from the current 25,000-30,000 crore monthly range, eventually reaching40,000 crore a month over the next two years.