Investors appetite for mutual fund SIPs robust, inflows over ₹12k cr for 4-months in row

According to AMFI data, SIPs flow in August stood at a record high of 12,693 crore compared to 12,139 crore in July this year. SIPs continued to garner more than 12,000 crore inflows since May 2022.

SIPs have grown by 2,770 crore in August 2022 year-on-year.

A year ago, investment in SIP was even less than 10,000 crore. In August 2021, the SIPs inflow stood at 9,923 crore.

This indicates that there has been significant growth in SIP investments.

SIPs are generally seen an affordable investment mechanism. An investor can invest as low as 500 on a monthly basis in SIPs, however, the minimum amount is different in various mutual funds schemes. By choosing SIP, a fixed amount is deducted from your bank account on monthly basis — which creates discipline in investments. You can easily enter and exit from SIP. The mere eye candy of SIP is that they do not require hefty sum for investment, they can be opted by anyone right from a teenager to an elderly.

There is also a tax exemption benefit of 1.5 lakh under section 80C of the Income Tax, available under SIP.

On its website, Clear explains that every time you invest in a mutual fund scheme through an SIP, you purchase a certain number of fund units corresponding to the amount you invested. You don’t need to time the markets when investing through an SIP as you benefit from both bullish and bearish market trends.

Further, Clear highlights when the markets are down, you purchase more fund units while you purchase fewer units when the markets are surging. Since NAV of all mutual funds are updated on a daily basis, the cost of purchase may vary from one SIP instalment to another. Over time, the cost of purchase averages out and turns out to be on the lower side. This is known as rupee cost averaging. This benefit is not available when you invest a lump sum.

Swapnil Bhaskar, Head of Strategy at Niyo said, “Investors don’t have to think about the market fluctuations as the SIP route averages out the investment price over the time. It helps them avoid timing the market which is very difficult to do consistently for a retail investor if not impossible,” as reported by PTI.

Bhasker added, most importantly, it is a great way for people to keep saving as a habit – this is especially important for millennials and GenZ who find it difficult to save.

In August, the overall mutual funds industry garnered a strong inflow of more than 65,077.46 crore — rising by 2.75 times from 23,604.92 crore in the previous month. While debt-oriented schemes posted an inflow of 49,164.29 crore compared to an inflow of merely 4,930.08 crore in July, the inflow in equity-oriented schemes dipped to 6,119.58 crore in August from 8,898.2 crore in July this year.

ICICI Direct in its latest report said, “Retail equity investors seems to be adopting a cautious stance as markets recover sharply from the lows and trade near all-time highs. Inflows during August 2022 was lowest since September 2021.”

Equity market has been trading volatile due to recession fear amidst macroeconomic conditions.

Meanwhile, in SIPs, a strong rise has been recorded in new investors in August. In the first five months of FY23, outstanding SIP accounts stood at 57.16 crore compared to 52.77 crore in mutual funds schemes, as per AMFI data. New SIP accounts in August 2022 rises by 3.71 lakh to 21.13 lakh new SIPs compared to 17.42 lakh new accounts in July month.

SIP AUM is at 6.4 lakh crore by end of August 2022, up by 17% year-on-year and 5% month-on-month. Also, over the past five years, SIPs AUM have soared by at least 30% annually — twice as fast as overall growth in the asset base of mutual fund industry.

From April to August 2022, SIPs contribution is around 61,258 crore to the MF industry.

Overall, asset under management (AUM) grew at record 39,33,877.77 crore in August 2022 compared to 37,74,802.90 crore in July 2022.

“SIP has been gaining popularity among Indian MF investors, as it helps in Rupee Cost Averaging and also in investing in a disciplined manner without worrying about market volatility and timing the market,” AMFI’s note said.

According to AMFI, SIP is an investment plan (methodology) offered by Mutual Funds wherein one could invest a fixed amount in a mutual fund Scheme periodically at fixed intervals – say once a month instead of making a lump-sum investment. The SIP installment amount could be as small as 500 per month. SIP is similar to a recurring deposit where you deposit a small /fixed amount every month.

Further, the mutual funds association added that SIP is a very convenient method of investing in mutual funds through standing instructions to debit your bank account every month, without the hassle of having to write out a cheque each time.

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