Systematic investment plans gain momentum in India

INFLOWS into the mutual fund industry through systematic investment plans (SIPs) reached close to Rs 670 billion (£6.7 bn) in the first seven months of the ongoing fiscal, suggesting the growing popularity of staggered investments.

This comes following an inflow of Rs 960.80 bn (£9.6 bn) through the route in 2020-21, data with the Association of Mutual Funds in India (Amfi) showed.

Moreover, mutual fund SIP contribution has seen a more than two-fold rise during the last five years. It was at Rs 439.21 bn (£4.39 bn) during 2016-17.

Also, the monthly collection through SIP surged to an all-time high of Rs 105 bn (£1.05 bn) in October, higher than Rs 103.5 (£1.03 bn) in September.

SIPs' assets under management (AUM) climbed to Rs 5.53 trillion (£55 bn) at the end of October from Rs 4.28 tn (£43 tn) in March-end.

Over the past five years, SIP AUM has grown 30 per cent annually, twice as fast as the growth in the overall mutual fund industry's assets base.

Some 2.38 million new SIPs were registered in October. The total registrations reached to 15m in the first seven months (April-October) of the current fiscal. This was way higher than the 14.1m new SIP registrations in the entire preceding financial year.

Currently, mutual funds have about 46.4m SIP accounts through which investors regularly invest in mutual fund schemes

"Staggered investment approach (via SIP or STP) in equity markets seems the ultimate solution to ride the wave of uncertainty as corrections would bring down the average cost of your total investments or in case the bull run continues, investors would not lose out on opportunity cost," said Akshat Garg, manager, research at Investica, a platform for investing in mutual funds.

SIP is an investment methodology offered by mutual funds wherein an individual saver can invest a fixed amount in a chosen scheme periodically at fixed intervals, instead of making a lump-sum investment.

The SIP instalment amount can be as small as Rs 500 (£5) per month.

According to Amfi, SIPs have been gaining popularity among Indian savers, as it helps in investing in a disciplined manner without worrying about market volatility or timing the market.

The 45-player mutual fund industry mainly depends on SIPs for inflows, with equity mutual funds attracting Rs 52 bn (£520m) in October, making it the eighth consecutive monthly infusion.

However, the quantum of net inflows dropped from Rs 86.77 bn (£867m) logged in September.

Harshad Chetanwala, a co-founder, MyWealthGrowth.com, said subscriptions in equity funds were lower compared to September as markets were a bit volatile in October and investors may have followed a wait and watch or staggered investing approach which is better in current market conditions.

"At the same time, there is a possibility that some of the outflows from these funds would have gone back to international funds and balanced funds launched during recent times," he added.

The debt segment saw net inflows to the tune of Rs 129.84 bn (£1.3 bn) last month, after seeing a net withdrawal of Rs 639.1 bn (£6.4 bn) in September.

(PTI)