April SIP inflow dips on profit booking

Investors not enthused when market is rising, say experts

The quantum of investment in mutual funds through the systematic investment route (SIP) fell in April, when Indian shares were galloping towards an all-time high. Against a historic high SIP flow of Rs 4,335 crore in March, the April inflow dipped to Rs 4,269 crore. Two factors took a toll on the SIP inflow — profit booking and maturity of accounts that were not renewed.

The decline was marginal. Some sector officials say profit booking and investors’ inherent resistance to invest at higher market levels caused this dip.

Jimmy Patel, chief executive officer (CEO) at Quantum Mutual Fund, says, “The fall in SIP investments is partly because of profit booking by some investors, as markets are rising fast. It is in investors' psyche to liquidate holdings and avoid making fresh investments when markets are high. These investors wait for the market to correct to re-invest.”

According to sector officials, nearly 240,000 SIP accounts matured in April — bringing down the net account additions to 480,000. This is less than the average 626,000 monthly additions seen in FY17. And those opened in April were not of high ticket size, compared to those matured. This resulted in a fall of about Rs 66 crore in SIP flows.

G Pradeepkumar, CEO of Union Mutual Fund, says,“Generally, after a hectic year-end period, the beginning of the new financial year tends to be slow. This would also contribute to a fall in SIP quantum.”

Domestic retail investors have increasingly turned towards systematic investment plans. The quantum of inflow has gone up from less than Rs 1,000 crore a month to more than Rs 4,300 crore. This ensured wider penetration of mutual fund products and also provided enough liquidity to fund managers. In the previous financial year, this mode of investment contributed nearly Rs 44,000 crore, the highest ever.

Kaustubh Belapurkar, director (fund research) at Morningstar India, says, “The decline in SIP investments should not be inferred as a pause. Inflows are quite strong and I think it will continue. In terms of maturity, April may be an aberration of higher number of accounts reaching maturity but not renewed.”