Investors Betting Big On Mutual Fund SIP; Monthly Inflows At Over Rs 12,000 Crore During May-August

Investors are betting big on systematic investment plan or SIP to generate long-term wealth with monthly flow in the mutual fund industry through the route continuing to be over Rs 12,000 crore for the past four months.

In fact, inflows through the SIP route touched an all-time high of Rs 12,693 crore in the month of August, a latest data with Association of Mutual Funds in India (AMFI) showed.

The inflows through SIP has been growing above 12,000-crore mark since May. It was at Rs 12,140 crore in July, Rs 12,276 crore in June, Rs 12,286 crore in May. Prior to that, it was at Rs 11,863 crore in April.

With this, total inflow has reached to Rs 61,258 crore in the first five months of the current fiscal. This came following an inflow of over Rs 1.24 lakh crore in the 2021-22 financial year.

Investors are flocking towards the SIP route for making investments as it helps investors, especially the salaried people, make the investment process simpler.

"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," Swapnil Bhaskar, Head of strategy at Niyo said.

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, he added.

Further, SIPs' assets under management (AUM) climbed to Rs 6.4 lakh crore at the end of August this year from Rs 5.76 lakh crore in March-end 2022. Over the past five years, SIP AUM has grown 30 per cent annually, twice as fast as the growth in the overall mutual fund industry's assets base.

Currently, mutual funds have about 5.72 crore SIP accounts through which investors regularly invest in mutual fund schemes.

Industry experts believe that a staggered investment approach (through SIP or STP) in equity markets seems the ultimate solution to ride the wave of uncertainty as corrections would bring down the average cost of total investments or in case the bull run continues, investors would not lose out on opportunity cost.

SIP is an investment methodology offered by mutual funds wherein an individual saver can invest a fixed amount in a chosen scheme periodically at fixed intervals — say once a month, instead of making a lump sum investment. The SIP installment amount can be as small as Rs 500 per month.

The 43-player mutual fund industry mainly depends on SIPs for inflows, with equity mutual funds attracting Rs 64,935 crore in the current fiscal (April-August). This came after witnessing an inflow of Rs 1.64 lakh crore in 2021-22.

Ashish Shanker, MD & CEO of Motilal Oswal Private Wealth, said that an increase in flows in the equity markets through SIP are a result of a confluence of factors like awareness of using equities for wealth creation and mutual funds as a vehicle and millennials preferring financial assets over traditional instruments such as gold and real estate and ease of transaction due to digital platforms.

"We believe this is a structural trend and likely to accelerate hence believe that Rs 20,000 crore of monthly SIP flows is very much possible in the next 18-24 months," he added.

According to AMFI, SIPs have been gaining popularity among Indian savers, as it helps in rupee cost averaging and investing in a disciplined manner without worrying about market volatility or timing the market.