Record SIP numbers bring cheer to mutual fund industry

Monthly SIP book nears Rs 10,000 cr, new SIP registration & AUM hit record highs

The Rs 36-trillion domestic mutual fund (MF) industry has built a solid pillar to stand on-systematic investment plans (SIPs). And the industry’s SIP game is only getting stronger.

In August, inflows through this route touched nearly Rs 10,000 crore and new SIP registration touched an all-time high of 2.5 million, despite concerns around expensive equity valuations. The total assets under management (AUM) for SIPs also touched a new record at Rs 5.3 trillion.

Taking note of the strong SIP numbers, analysts have given a thumbs up to the sector.

“MF AUMs have remained resilient through FY21 despite weaker flows, aided by strong capital markets. We see signs of sustained recovery in equity flows in the past six months, and with SIPs continuing on a growth trajectory (24 per cent growth in August 2021 versus the FY21 run-rate), we find risk-reward turning favourable for AMCs,” said broking firm Nomura in its report.

SIP inflows have been more than Rs 9,000 crore each of the last three months. So far this fiscal, inflows through the SIP route have exceeded Rs 46,000 crore.

Experts say the uptrend in the markets coupled with the ease of investing through the new-age digital platforms have underpinned SIP flows.

In FY21, even when equity funds continued to witness outflows, SIP had continued to remain strong, bringing in nearly Rs 96,000 crore of net inflows.

SIP is an investing technique wherein the investor commits a fixed sum every month as opposed to investing a large sum at one go.

In the five months of the current fiscal, nearly 10 million new SIP accounts have been opened as compared to 14.13 million in FY21.

Industry players believe there is scope for the SIP book to swell further driven by penetration of digital platforms.

“Retail participation has continued to gain momentum, which is visible from the growth in the SIP book over the last few months. Significantly, fintech firms’ contribution to a number of SIPs has grown three times. Although two-thirds is still contributed by traditional channels. I think investors are confident of the continuing economic recovery. Retail investors in particular take a long view on equity,” said Aashwin Dugal, co-chief business officer, Nippon India Mutual Fund

Strong SIP flows is a big positive for the industry as this is seen as a sticky way to build AUM. Typically, SIP investors continue with their investments irrespective of the market levels. On the other hand, investors putting in lump sums tend to churn their holdings more frequently.

For instance, equity inflows in August dropped 62 per cent to Rs 8,667 crore in August against a record Rs 22,584 crore in July. However, SIP flows increased month-on-month.

Earlier, SIP investors invested for an average time frame for three years. Now they are in for a longer period.

“But now looking at the long term returns of the equity funds; investors' behavior has seen drastic change. They are willing to stay invested for longer duration irrespective of the market condition,” said a CEO of the top fund house.

In the last one year, largecap funds have given average returns of 55 per cent and even for a 10-year period it has managed to give returns of nearly 14 per cent. While mid and smallcap funds have given average returns of 18-19 per cent in the last 10 years despite all the volatility in the markets.

Experts say to generate such attractive long-term returns one has to stay invested and the SIP route is a good way to do so.