Mutual fund industry in touching distance of Rs 10,000-crore-SIP book

© Jash Kriplani Mutual fund industry in touching distance of Rs 10,000-crore-SIP book

The mutual fund (MF) industry saw contribution of Rs 9,923 crore in August, 2021, shows AMFI data.

According to industry experts, the reason for the nearly Rs 10,000-crore SIP book is due to the economic recovery seen post-Covid.

“The economic recovery has made investors more confident. Last year, investors were in a state of panic as there was uncertainty around jobs with economic lockdown. But, now investors are seeing more certainty in their jobs and better cash flows, which has made them more inclined to investments,” says G Pradeepkumar, chief executive officer of Union MF.

As of August 31, 2021, the number of SIP accounts stood at 4.32 crore, while SIP assets under management stood at Rs 5.26 trillion.

As Covid-19 outbreak heightened in 2020, there were also SIP cancellations, as some lost their jobs and were uncertain of their future income.

“Now, new investors have come in and existing investors who saw sharp recovery in their investments after last year’s market crash have even increased SIP investments as their cash flows have improved,” says Bengaluru-based Deepak Chhabria, chief executive officer and director at Axiom Financial Services.

“Employees in certain sectors such as IT have even seen substantial hike in their salaries. So, such clients have increased their SIP investments,” he adds.

Strong equity markets has built confidence

MF investors usually use SIPs to put money in equity schemes.

So, the equity market recovery from crash of March, 2020, made investors see benefit of long-term investing in equity.

An analysis by IDFC MF shows that for investors that stay put despite the market crash of last year, the SIP returns have been quite robust.

“Over the last one-and-a-half years, clients have experienced how small monthly savings done through SIPs have created a large corpus of investments and these clients have spread awareness around SIP through word-of-mouth,” says Dhruv Mehta, chairman, Sapient Wealth Advisors and Brokers and chairman of the Foundation of Independent Financial Advisors.

Apart strong recent returns, lower returns from other investment options is also making investors switch to SIPs.

Vinod Jain, principal adviser at Jain Investment Planner, says that with interest rates being low, he has also seen clients switching from bank recurring deposits and moving to SIPs.

According to Swarup Mohanty, chief executive officer of Mirae MF, if debt funds also start to get SIP flows, it can take the SIP book to a much larger size for the industry.

He adds that AMFI’s Mutual Fund Sahi Hain has played an important role in growth of SIPs.

Coming a long way

Jain says the growth of SIPs is due to efforts of industry over the last 20-25 years.

“Back then, SIPs were not even popular in developed markets. We are one of the countries that have popularised the concept of rupee cost averaging and its benefits,” Jain says.

“SIPs are the only way in which investors can invest in equities in a disciplined manner, while also reducing the volatility risk that comes with equity investing,” he adds.