The struggling domestic mutual fund industry has reasons to smile, in spite of tight regulatory scenario and poor penetration. The fund houses’ continuous investor awareness programmes across the country have finally started showing results.
The mobilisation of funds from retail investors through the systematic investment plan (SIP) route has shown a steep rise of over 40 per cent. According to a top official of the Securities and Exchange Board of India, the amount collected through SIPs has risen to as high as Rs 1,200-1,300 crore a month. It earlier stood at around Rs 800-900 crore.
Having learnt a lesson from the previous market crisis, in 2008, domestic retail investors have now become smarter in taking advantage of the weak market scenario. According to fund managers, lumpsum investments have taken a back seat and new fund offers have lost sheen.
Since the start of the current calendar year, domestic benchmark indices have corrected about 18 per cent. Also, it is being observed that the money flow has significantly increased during the period of deep corrections.
For instance, when the markets tanked in February this year, the overall net inflow in equity schemes was over Rs 2,800 crore in just one month. Another similar huge net inflow was seen in August, when retail investors pumped in close to Rs 2,000 crore.
Jaideep Bhattacharya, chief marketing officer, UTI Asset Management Company, says: “Not only are investments through SIPs on the rise, but the quantum of amount has also increased.”
The rise in SIPs is being observed since the end of last year. Association of Mutual Funds in India Chief Executive Officer H N Sinor had then told Business Standard that there was a significant rise in the number of SIPs.
Investment through SIPs is a healthy sign for the industry, as money mobilised through these is generally sticky. It helps the industry keep a check on outflows. Over 95 per cent of the inflows in equity-related mutual fund schemes is retail money, industry CEOs say.
The impact of rising SIP amount can be gauged from the fact that the April-August period of the current financial year saw net inflows of Rs 1,703 crore in pure equity schemes. This augurs well for the industry, which witnessed net outflows of a whopping Rs 7,600 crore during the same period last year.
In 2010-11, equity schemes had seen the largest net outflow of Rs 13,405 crore. This had upset the industry players. “This August, the industry saw around Rs 2,000 crore of net inflows in equity schemes. This is an encouraging sign,” says Christopher Spelman, chief executive officer, JPMorgan Mutual Fund.
Further, an increased participation by retail investors helped fund managers invest close to Rs 2,500 crore in August, the highest in three years.