Retail investors are increasingly opting for systematic investment plans (SIPs) in mutual funds as the industry had garnered over Rs 7,600 crore through this route in August, a surge of 47 per cent from the year-ago period.
According to the Association of Mutual Funds in India data, total funds garnered through SIPs have reached Rs 36,760 crore so far in the current fiscal (April-August). In the entire 2017-18, over 67,000 crore was mopped-up through SIP route and more than Rs 43,900 crore in the preceding fiscal.
SIPs have been the preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk. Further, investors are not showing interest in traditional asset classes like real estate and gold, and they prefer financial assets such as mutual funds.
“While SIP remains a popular mode of investment, there is a need for investor awareness on the advantages of SIP, especially in volatile markets. There are emerging challenges in this space such as premature cancellation of SIP instructions as investors rush to discontinue their SIPs in a falling market,” said Stefan Groening, Director — Investment Solutions, Sharekhan, BNP Paribas.
As per the latest data, SIP contribution in August stood at Rs 7,658 crore against Rs 7,554 crore seen in the preceding month. In comparison, the industry had garnered Rs 5,206 crore in August last year and Rs 3,496 crore in August 2016.
MFs have 2.38 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes. In the current fiscal, over 10 lakh SIP accounts were added each month on an average, with an average ticket size of Rs 3,200.
“SIP flows seem to have contributed majorly to inflow in mutual fund schemes as investors remained wary of expensive valuations amid rising concerns over high oil prices and rupee depreciation,” Bajaj Capital CEO Rahul Parikh said.
SIP is an investment vehicle that allows investors to invest in small amount periodically instead of a lumpsum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a small or fixed amount every month.