Equity schemes have seen net inflows of nearly Rs 5,200 crore this calendar year, when the benchmark stock indices declined by around 21 per cent. According to data on the SEBI Web site, these schemes saw a net outflow of Rs 27,830 crore last calendar year when the equity markets gained 17.25 per cent.
Reasons
Apart from it being a function of the falling markets (when people see a good opportunity to invest), the rise in equity investments is also due to the rising number of SIP investments. SIPs or Systematic Investment Plans consist of regular, equal payments being made into mutual fund schemes by investors. “The increase in the number of SIPs this year has been for a number of reasons. One is the disappearance of the NFO culture, which has led to a drop in the number of one-time investments. Also, the markets have been shaky,” said Mr Dhirendra Kumar, CEO, Value Research.
These factors have led to distributors and fund houses re-aligning their focus on SIPs in a bid to bring in more investors, he added. According to analysts and fund house officials, close to Rs 1,600 crore finds its way into the industry a month.
Dip in 1-time investment
Fund house officials also agree that the number of new and one-time investments has come down significantly prompting the need for MFs to push SIP products. One advantage of investing in SIPs is that the investor can deal with volatility by averaging out his investments; a higher number of units is allotted to the investor when valuations are lower and lesser number of units when valuations in the equity markets are higher. This helps mitigate risk, said fund managers.
“Last year the equity markets did well, which led to profit-booking and net outflows in the industry. This year, due to this sort of never-seen-before volatility, SIPs are being positioned as a volatility solution to investors,” said the equity fund manager with a foreign fund house.
“SIPs have been one of the most important factors in bringing in assets into the industry. The one-time investments into the industry have reduced significantly,” said Mr R.S. Srinivas Jain, Chief Marketing Officer, SBI Mutual Fund.
According to Mr Jain, within SIPs, the category of gold SIPs has seen a huge increase this year due to the rise in gold prices. However, fund analysts say that while gold SIPs have seen a significant amount of interest from investors, it is still only about five per cent of the total SIP business.
Fund analysts say that Reliance, HDFC and SBI mutual funds have around 60-70 per cent of the SIP business, with HDFC accounting for the highest number of the SIP flows.