Monthly SIP contribution at all-time high of Rs 9,923 crore: Check trends and what experts suggest now

There is a net outflow in the small-cap category indicating that investors may have started booking profits as market and small-cap index continue to surge.

Monthly SIP Contribution , equity funds, small-cap funds, SIP Accounts, balanced funds, NFO
Investing near all time highs is not bad provided one is taking a view of at least 5-7 years through the SIP route.

The mutual fund route to save for one’s financial goals is turning out to be on the right path. Going by the August 2021 Monthly Mutual Fund data as released by AMFI, the investors seem to continue pouring money into the mutual fund schemes and even rebalancing their portfolio. According to N S Venkatesh, Chief Executive, AMFI, “Overall positive flows in the open-ended MF schemes and market indices touching all-time high, helped the Indian MF Industry Net AUMs to breach the record Rs 36 lakh crore milestone in August 2021.”

The participation of the retail investors has also been overwhelming especially on the SIP front. “Retail AUM at Rs 17.15 lakh crores, almost half of Total Industry AUMs, SIP AUMs at record high Rs 5.26 lakh crores, which now forms a third of Retail AUM, healthy rise in SIP Accounts at record 4.32 crores and monthly SIP contribution at an all-time high at Rs 9,923.15 crore is reflective of established and rising retail preference towards mutual funds as a long-term wealth creation avenue,” adds Venkatesh.

The net inflow has also been largely on the back of the NFO launched over the previous few months. “It is heartening to see continuing growth in net equity aum this year. Even though part of the growth can be attributed to new fund offers, overall sentiment has decisively improved for HNI and retail investors towards equity. This FY equity net sales have aggregated approx. Rs 1.2 lakh crore,” says Aashwin Dugal, Co Chief Business Officer, Nippon India Mutual Fund.

“The trend of strong inflows into equity mutual funds has continued for the sixth consecutive month. Many investors who were staying on the sidelines are slowly getting back. This trend is also getting reflected in the record NFO collections. The decline of the second wave, increase in vaccinations, sharp equity rally in the recent past, and the stability of the markets despite the second wave have added to investor comfort and confidence,” says Arun Kumar, Head of Research, FundsIndia.

Shift to Equities

A clear shift of money from other assets seems to be taking place. Both gold and fixed income investments are lacking attractiveness in recent times. “With lower yields in debt instruments including Banks FDs and flat returns in Gold, investors are eager to embrace equity funds. On the macro front, positive sentiment unleashed by better than expected economic recovery post first covid wave, accommodative US Fed stance has only added to the strong belief,” says Aashwin Dugal, Co Chief Business Officer, Nippon India Mutual Fund

Emerging Trends

There also seems to be 2-3 trends emerging out of the recent mutual fund investments by investors. The small-cap category has shown outflows while money seems to be moving into hybrid or balanced funds.

“In terms of net mutual fund flows in the Equity category the Flexicap category led the pack followed by Focused, Sectoral/Thematic and Large and MidCap in that order,” says Umang Thaker, Head of Products, Motilal Oswal AMC.

“The industry continues to see net inflows in August too, as investors have invested Rs.6,863 Crore in equity oriented NFOs. One important thing to notice is that there is a net outflow in the small-cap category indicating that investors may have started booking profits as market and small-cap index continue to surge. This could be a good strategy to book some profit right now particularly if your investments are in small cap funds.” Harshad Chetanwala, Certified Financial PlannerCM and Co-Founder

Aashish Somaiyaa, Chief Executive Officer – White Oak Capital says, “A granular look at the data of equity and balanced advantage category of schemes suggests that the gross flow, the redemption and the net flow for the months of July and August remains to be at the same elevated level. But there is a significant shrinkage in the net flow for equity category and corresponding bump up in net inflow of the balanced advantage category. This leads one to believe that on aggregate industry level large balanced advantage NFO has garnered a lot of traction by way of switches from equity to balanced advantage category. From a retail investors’ perspective in the short term it may not be a bad development given elevated market levels and generally lower risk perception of balanced advantage funds.”

Kailash Kulkarni, Chief Executive, L&T Mutual Fund shares an interesting trend emerging from the recent AMFI data – “Two important statistics (that often get missed out given the focus on AUM) are key to gauging the way forward for the mutual fund industry. The number of unique investors added in the last 5-6 months is almost similar to the unique investors added in the last two years, thus proving that the sector is deepening its penetration and reaching out actively to first time investors. Secondly the growth of SIPs, driven by digital platforms, reflect the rising participation and confidence of the retail investor.”

“The latest AMFI data suggests investors are favoring equities. Outflow in small-cap is in line with valuations in this space going high and higher inflow in dynamic asset allocation is in the right direction as investors are indecisive about allocating capital in pure equity strategy and valuation driven strategy in equity allocation is a better strategy. We are currently in a bull phase of equity due to easy Liquidity and Flows and learning from Previous Bull Markets is not to put entire money in equity and basis individual risk tolerance asset allocation should be done,” informs Tarun Birani, Founder & CEO, TBNG Capital Advisor.

Not all fund categories are attracting money as some of them are falling out of investor focus. “Value/Contra and ELSS funds continue to witness net outflows even this month. Focused and Flexi Cap funds were the preferred investment choice this month with maximum inflows in these categories,” informs Gautam Kalia, Head – Investment Solutions, Sharekhan by BNP Paribas.

Investing near all time highs

If you as an investor is not sure about investing at the current all-time high levels, here’s what Rahul Shah,Co-head of Research at Equitymaster has to suggest. “Investing near all time highs is not bad provided one is taking a view of at least 5-7 years through the SIP route. An investor would be doing a big disservice to his long term returns if a market crash in the near future scares him out of his SIPs. He should ignore the market noise and religiously keep doing his SIPs even if he is starting out now. Over a 10-year period, it doesn’t really matter whether one has started investing at all-time highs or multi-year lows. Patience and consistency matters more here than timing the market.”

“There’s never the right time to initiate the investing process in equity funds. More than trying to time the market, make sure your savings are exposed to equities for a longer horizon. What is also important is to stick to your asset allocation model with funds adequately diversified across sectors and assets. Balanced Funds is one category that investors may consider in these times,” says Sanjiv Bajaj, Jt. Chairman & MD, Bajaj Capital.

As Dugal puts it, “Even though markets have scaled historic highs, I believe that two factors will continue to strengthen retail flows – Relatively lower yields in other asset classes over the last few months and mounting belief in the fundamental strength of Indian economy, notwithstanding intermittent changes in global macros, effects of which will be temporary.”

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