SIP folios up 37% at 9.2 mn despite market volatility

Surge in numbers is significant as small investors are bulls by nature and uusually exit quickly when the market tanks or is range-bound

The mutual fund (MF) sector added 1.9 million Systematic Investment Plan (SIP) accounts in the first nine months of 2015-16. This took the SIP count to 9.2 mn at end-December 2015 from 6.7 mn a year ago, a rise of 37 per cent.

The SIP accounts’ count was 7.3 mn at end-March 2015, meaning a monthly rise of roughly 200,000 SIPs, in a period when Indian equities went through a particularly turbulent phase, sliding 6.7 per cent.

SIP numbers had declined to 6.2 mn in March 2014 from seven mn a year earlier, before showing a steady rise from December 2014.

“Most SIP investors have gone through two market cycles, one good and one bad, and have understood the importance of rupee-cost averaging and disciplined investing for long-term wealth creation,” said Himanshu Vyapak, deputy chief executive officer (Dy CEO), Reliance MF. “Not only have the SIP numbers risen but so have their average size and tenure.”

The average SIP size was Rs 2,938 in December 2015 from Rs 2,742 in March. It was Rs 2,100 in March 2013, a 35 per cent rise in 30 months.

Vyapak estimates half the SIPs are currently from what is termed the B-15 locations, meaning from other than the top 15 cities. Fund houses have been pushing aggressively into tier-II and tier- III cities, after market regulator Sebi allowed them to charge an extra 30 basis points (0.3 percentage points) as part of their total expense ratio for inflows from these regions.

“Earlier, distributors had a tendency to push lumpsum investment when the markets were high. That tendency has reduced and many have now realised the importance of SIPs in creating positive customer experience and a sustainable business model over the long term,” said Chandresh Nigam, CEO at Axis MF. Investor education initiatives have also been instrumental in driving SIPs, said experts.

Observers believe investors are preferring MFs as a safer alternative to direct equities. Which is why the sector has seen sustained inflow into equity schemes since May 2014, even as retail (from non-wealthy individuals) cash volumes in direct equities dropped a fifth in calendar year (CY) 2015.

Nigam says the sector has a long way to go. For, the number of distinct households investing in SIPs might be far less than the total numbers, with double counting. Vyapak is optimistic that SIPs can bring in another Rs 6.500-odd crore by way of monthly inflows in the next four to five years.

MFs bought shares worth Rs 75,000 crore in CY15. There are about 460 equity-oriented schemes, managing assets worth Rs 4 lakh crore.