Although the mutual fund industry AUM touched an all-time high at Rs.19.26 lakh crore, SIP inflows in mutual funds has slowed down marginally in April.
Fund houses received SIP inflows of Rs.4,269 crore in April compared to Rs.4,355 crore in March, a downfall of Rs.86 crore.
Experts attributed this to profit booking. “It is just a minor aberration. The investors who may have completed three years of investment in April may have redeemed their investments,” says Kaustubh Belapurkar, Director, Manager Research, Morningstar India. He added that it is too early to predict a trend.
G. Pradeepkumar, CEO, Union Mutual Fund says, “There is nothing to be worried about this slight decrease in the total amount collected through SIPs. Typically, SIP inflows decrease at the start of the financial year because SIP accounts of higher amounts may have been closed in April.”
Like SIP inflows, there has been a slight reduction in SIP accounts.
In a note sent to the fund houses, AMFI has said, “It has been reported by one AMC that they were reporting inactive SIP folios. This has been excluded in the current report for April 2017, resulting in reduction in balance of SIP accounts as on April 30, 2017 by over 21,000 folios. In respect of one AMC, SIP transactions through channel partners i.e. subsequent monthly SIP installments were also considered as new SIPs till March 2017, which was rectified by the concerned AMC in April 2017, resulting in reduction balance of SIP accounts as on April 30, 2017 by more than 5 lakh. The total no. of SIP accounts as on April 30, 2017 stood at about 1.34 crore.”
However, industry experts are of the opinion that SIP inflows would increase in future. Experts attribute this optimism to the exuberance in market and under penetration of the mutual fund industry.
“The investor awareness initiatives taken by the AMCs and advisors, towards financial inclusion and the exuberance in the market are driving these fresh SIP inflows. We have been witnessing a steady increase in our SIP book as well, with new investors keen on investing and existing investors hiking up their SIP allocation,” says Shifali Satsangee, Founder of Funds Ve'daa.
“The penetration of mutual funds is still low in the country and hence even if there is a fall in the market the overall inflow through SIPs will increase in future,” says Kaustubh.
Most financial advisors recommend SIPs to their client as it helps in the diversion of risk and rides out market volatility.
“Retail investors should not try to time the market. Investors should be educated about the fact that irrespective of the market situation, regular contribution through SIPs would help achieve their goals.,” says Nisreen Mamaji, Founder, MoneyWorks Financial Advisors. Nisreen says that investors who invested through financial advisors would not prefer redeeming at market peak.
Experts expect that SIP inflows would remain on an upward trend even in market correction due to maturity of investors.
“We have seen SIP growth irrespective of the market movements. SIP is more about discipline than timing the market. Minor corrections will keep taking place and I do not think that this would deter investors from SIP investments as they are mature when it comes to investment,” says Rajiv Shastri, CEO, Peerless Mutual Fund.
However, Vidya Bala, Head of Mutual Fund Research at FundsIndia is of a different opinion. She said that the industry is yet to see the behavior of investors. “It would become clear once market witnesses a sharp downfall.”
AMFI data shows that the MF industry manages AUM of Rs.1.54 lakh crore through SIP as on April 2017, which is about 8% of the overall MF industry AUM. Of the Rs.1.54 lakh crore, Rs.1.43 lakh crore has been invested through distributors and Rs.11,270 crore through direct plan.