Inflows in SIPs may turn vulnerable if returns turn negative: UBS

Retail flows into Indian equity market are likely to be vulnerable as equities are perceived as a risky asset, while investors' fixation with the bank account still remains, says a UBS report.

According to the global financial services major, investors are open to put a stop on fresh investments or even redeeming SIPs (systematic investment plan or monthly committed investments) due to various catalysts.

According to a UBS Evidence Lab survey authored by Gautam Chhaochharia and Sanjena Dadawala, analysts with UBS Securities India, retail inflow in SIPs may be vulnerable if returns turn negative.

"Our view of moderation in local retail flows has started to play out, but Nifty and SMID (small and midcaps) valuations suggest strong sustained support from local flows is being priced in," UBS said in a research note.

"We remain underweight on SMIDs and believe the risk-reward for the market remains unattractive," it added.

Domestic investors have made significant investments in the Indian stock market, resulting in a rally in equities even as foreign investors made their exit owing to global headwinds.

The note further added that "for non-investors, fear of losing money remains a key deterrent. The fixation with bank deposits as a good 'returns' option remains broad based."