There is good news for the Rs19 lakh crore mutual fund industry.
Despite outflows in the last two months of Q1 FY 2017-18, SIP inflows in mutual funds continue to grow.
The latest AMFI data shows that the mutual fund industry received a monthly inflow of Rs4,564 crore through SIPs. This is the average monthly inflow of three months for the period, April to June 2017. In June, the industry witnessed inflows of Rs4,744 crore. In the preceding quarter, i.e., between January and March 2017, the average SIP inflow was Rs4,023 crore.
AMFI data also shows that the average ticket size during April-June, 2017 was about Rs3,300 per SIP account. The average SIP was up by Rs100 from the January-March 2017 quarter.
Further, the industry added 7.75 lakh SIP accounts on an average each month during the first quarter of FY 2017-18. This means, the industry has added over 20 lakh SIP accounts in just three months. The number of total SIP accounts reached 1.45 crore.
Experts attributed this to ease and flexibility in investing in mutual funds through SIPs.
Kaustubh Belapurkar, Director, Mutual Fund Research, Morningstar India, believes that many investors find it is easy to invest in mutual funds through small monthly contributions. “Investor education programmes encouraged new investors taking the SIP route to invest their money in mutual funds. In addition, informed investors are increasingly investing in equity funds through SIPs, thanks to the market rally. Moreover, many investors use STP to invest in equity funds,” says Kaustubh.
Kailash Kulkarni, CEO of L&T Mutual Fund, agrees. “A lot of interest has been generated around mutual funds. Whenever a prospective investor comes to an advisor to seek investment advice, they advise them to invest in mutual funds through SIPs,” says Kailash.
However, he does not agree that investors start an SIP by looking at the market levels. “Investors look at the SIP returns that schemes have given in the past 5 to 10 years. They see that the long-term SIP returns have been quite good and hence start investing for the long term. The quality of the SIPs that the industry is receiving has also improved. Most of the retail investors invest in equity funds through SIPs. Hence, these inflows are sticky and the average amount of SIP has been increasing,” says the CEO of L&T MF.
G. Pradeepkumar, CEO, Union Mutual Fund, attributed this growth to investor awareness programmes. “Investors who would have otherwise made lump-sum investment are now taking the SIP route to take advantage of rupee cost averaging,” says Pradeepkumar.
Most financial advisors recommend SIPs to their clients as investors do not have to then worry about market volatility or about timing the market.
