SIP inflows have declined in December 2011 and January 2012. Some experts are of the view that investors are switching their investments to tax-free products with the financial year-end closing in while others attribute it to the loss of confidence among investors in the market due to the prevailing volatility.
“There has been a reduction in new SIP inflows, but there are strong reasons for it. Investors are switching their investments to tax saving investments as the financial year comes to an end. But we feel that the industry will come into good shape after the end of the current fiscal,” says Srinivasan Jain, CMO, SBI Mutual Fund.
A top AMC official shares Srinivasan’s optimism. “Every AMC is trying to figure out different ways to increase their SIP inflows. Some of them are even offering higher commissions to garner more perpetual SIPs. It is a temporary issue and should improve in next three months,” says a top official of an AMC preferring anonymity.
According to a leading registrar, new SIP registrations for the month of December 2011 stood at 1.51 lakh which dropped to 95,272 in January 2012.
Industry officials are not surprised at the declining figures. “Unfortunately, the market has failed to perform in the last four years and investors are not sure whether there will be a bull run in the next two years. A lot of investment has moved from SIPs into tax-free products, where the investors are earning 11% returns. They do not want to take risks in equity because they currently lack the confidence in the market. Investors need to understand that SIPs are long term investments. Secondly, there is massive retrenchment happening across sectors. People who lose their job first stop their SIP because that is not a necessity,” says Akshay Gupta, CEO & MD, Peerless Mutual Fund.
