What is driving SIP inflows even when equity markets are volatile?

Currently, domestic mutual funds have about 2.29 crore active SIP accounts

Systematic investment plans, better known as SIPs, are in the news again. This time for showing a rise in their collections in the first quarter of FY19 despite volatile markets.

According to the Association of Mutual Funds in India, in April-June of FY19, the 43-player industry collected a total of Rs 21,548 crore through SIPs, 58 percent higher than the Rs 13,597 crore collected in the same period last year.

AMFI data also shows that the MF industry added 9.83 lakh SIP accounts on an average during the first quarter of FY19, with an average size of around Rs 3,300 per SIP account as compared with Rs 3,250 last year.

 At present, domestic mutual funds have about 2.29 crore active SIP accounts, through which investors regularly invest in Indian MF schemes.

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Since the start of January, the BSE Midcap and Smallcap indices have fallen around 4 percent each, while the Sensex has risen around 5 percent.

Foreign institutional investor outflows, high crude oil prices and rupee depreciation against the dollar has kept Indian equity markets volatile.

The above data clearly shows that despite volatile markets investors are not shunning SIPs. Experts said investors are becoming more savvy and mature.

SIPs are investment plans offered by MFs wherein one could invest a fixed amount in a scheme periodically at fixed intervals, say once a month instead of making a lump-sum investment.

The SIP instalment amount could be as small as Rs 500 per month. SIP is similar to a recurring deposit where you deposit a small /fixed amount every month.

SIP is a very convenient method of investing in MFs. By issuing standing instructions to your bank to debit your account every month, one can avoid the hassle of having to writing out a cheque.

This method has been gaining popularity among Indian MF investors, as it helps in rupee cost averaging and also in investing in a disciplined manner without worrying about volatility and timing the market. SIPs help the investor average his cost over a period of time, fetching more units when prices are low and fewer units when prices are high

In the current scenario, buying at low prices and selling at higher prices works brilliantly because the volatility means you buy more units at lesser price and hence your ultimate returns will be better.

Experts also feel that investor education initiative by AMFI and industry is aiding SIP flows. Over the years, investors have also matured and learnt to ignore the market noise and continue investors through SIPs month after month.

This unwavering discipline has helped many SIP investors build an impressive portfolio. This provides confidence to MF officials who now feel that SIP flows will remain steady and will not go away during market volatility.

During the week, HDFC Asset Management Company announced its initial public offer. It will launch its initial public offer July 25. The offer will remain open till July 27. The company is aiming to raise Rs 2,800 crore through the public issue at the price band of Rs 1,095 to Rs 1,100 per share. Bids can be made for a minimum lot of 13 equity shares and in multiples of 13 equity shares. This will be the 5th listing within the HDFC group.

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