Although the mutual fund industry saw net outflows of Rs.40,711 crore in May, SIP inflows in mutual funds continue to grow. AMFI data shows that the industry has witnessed a growth of 7% in SIP inflows in May by receiving Rs.4680 crore compared to RS.4270 crore in April, an increase of Rs.315 crore.
SIP inflows include contribution from both SIP and STP.
Experts attribute this to growing investor appetite for equity funds and SIP as the preferred vehicle to invest in the markets both for new investors and existing investors.
“As the markets are at a peak, investors who are cautious are taking the STP route to invest in equity funds. Investors see this as the favourable way of investing in equity funds,” says Mumbai-based IFA Vinod Jain of Jain Investments.
There has been an increase in the SIP accounts in the month of May with the SIP inflows. According to AMFI, the total SIP accounts in May stood at 1.40 crore, up by 6 lakh from about 1.34 crore in the previous month.
SEBI data shows that the mutual fund industry has witnessed an addition of over 10 lakh folios in May, which indicates that majority of the investors are coming through the SIP route.
Industry experts say that SIP inflows would continue to increase in future. They say that investors are optimistic about the markets. As the mutual fund industry is underpenetrated, it has potential to reach out to customers thus leading to an increase in SIP accounts, they added.
“Today, the folios in the mutual funds industry have crossed the five crore mark. However, number of unique investors is very low considering the fact that an average investor holds at least five folios. The penetration of mutual funds in India is in the 1-2% range. We have a long way to go as the penetration of mutual funds in developed market is over 50%,”says Gaurav Perti, CEO of Fincash.com.
Most financial advisors recommend SIPs to their clients as investors do not have to worry about market volatility and timing the market. It also helps in rupee cost averaging.