Inflows in the mutual fund industry through systematic investment plans or SIPs reached over Rs 1.24 lakh crore in the 2021-22 financial year, a jump of 30 percent from the preceding fiscal, suggesting growing popularity of the route among retail investors to generate long term wealth. In comparison, an inflow of Rs 96,080 crore through the route was registered in 2020-21, data with the Association of Mutual Funds in India (AMFI) showed.
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 — say once a month, instead of making a lump sum investment. The SIP instalment amount can be as small as Rs 500 per month.
Moreover, mutual fund SIP contribution has seen over two-fold rise during the five years. It was at Rs 43,921 crore during 2016-17. Additionally, the SIP book has also grown consistently from Rs 9,182 crore in March 2021 to an all-time high of Rs 12,328 crore in March 2022, which is a growth of around 34 percent.
The increasing SIP book is indicative of the increasing investors' interest towards equity funds as a better medium to invest in equity markets, Himanshu Srivastava, Associate Director Manager Research, Morningstar India, said.
Further, SIPs' assets under management (AUM) climbed to Rs 5.76 lakh crore at the end of March this year from Rs 4.28 lakh crore in March-end 2021. Over the past five years, SIP AUM has grown 30 percent annually, twice as fast as the growth in the overall mutual fund industry's assets base.
Currently, mutual funds have about 5.39 crore SIP accounts through which investors regularly invest in mutual fund schemes. Industry experts believe that 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 total investments or in case the bull run continues, investor would not lose out on opportunity cost.
According to AMFI, SIPs have been gaining popularity among Indian savers, as it helps in rupee cost averaging and investing in a disciplined manner without worrying about market volatility or timing the market.
The 43-player mutual fund industry mainly depends on SIPs for inflows, with equity mutual funds attracting Rs 1.64 lakh crore in 2021-22. This comes following a net outflow of Rs 25,966 crore during the preceding financial year.
Going ahead, the trends of growing inflows in equity mutual funds is likely to sustain given the current economic condition and markets, Manish Kothari, CEO and Co-Founder, ZFunds, said.
First Published: IST