SIP continued to be the preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk, the industry body noted.
The mutual fund industry garnered Rs 8,246 crore through systematic investment plans (SIPs) in October, a rise of 3.2 per cent as compared with the year-ago period, amid rally in the stock market following a series of reform measures taken by the government. With this, the total SIP contribution in the first seven months of the current financial year rose to Rs 57,607 crore as compared with Rs 52,472 crore in April-October 2018, according to the latest data from the Association of Mutual Funds in India (Amfi). SIP continued to be the preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk, the industry body noted.
According to the data, SIP contribution in October stood at Rs 8,246 crore, which was 3.2 per cent higher than the Rs 7,985 crore clocked in the same month last year. However, the 44-player mutual fund industry, which mainly depends on SIPs for inflows in equity funds, saw a marginal drop in SIP investments as compared to the preceding month. In September this year, the industry had collected Rs 8,263 crore. It had garnered Rs 8,231 crore in August, Rs 8,324 crore in July, Rs 8,122 crore in June, Rs 8,183 crore in May and Rs 8,238 crore in April.
Inflows into SIPs have averaged about Rs 8,000 crore for the 12 months till October. “The positive inflow indicates building up of a positive investment trend. Series of steps taken by the government in the recent times to boost domestic economy had improved sentiments and helped the markets to surge. This has helped investors slowly gain confidence and get back to investing,” said Himanshu Srivastava, senior analyst, manager research, Morningstar Investment Adviser India.
Going ahead, experts believe that equity markets would perform better in the coming months due to positive initiatives taken by the government, which will drive further inflows in mutual funds through the SIP route. Meanwhile, the Sensex gained nearly 4 per cent in October. In the past few years, investment through SIPs has been rising as an inflow of close to Rs 92,700 crore through the mode were seen in 2018-19, over Rs 67,000 crore in 2017-18 and more than Rs 43,900 crore in 2016-17.
Currently, mutual funds have 2.89 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes. The industry, on an average, added 9.35 lakh SIP accounts each month during the current financial year 2019-20, with an average ticket size of Rs 2,850. SIP is an investment vehicle that allows investors to invest in small amount periodically instead of lump sum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a fixed amount every month.
Overall, mutual fund schemes witnessed an inflow of Rs 1.33 lakh crore last month as compared to a redemption of Rs 1.52 lakh in September. The positive inflow could be attributed to debt-oriented schemes, which saw an inflow of 1.2 lakh crore. The inflow has pushed the asset base of the mutual fund sector, comprising 44 players, by more than 7 per cent to over Rs 26 lakh crore at October-end from Rs 24.5 lakh crore at the end of September.