MF industry cheers record inflows via SIPS in August
Monthly book almost touches ~10,000 crore; new registrations and AUM hit record highs
The ~36-trillion domestic mutual fund (MF) industry systematic investment plan (SIP) game appears to be getting stronger.
In August, inflows through this route touched nearly ~10,000 crore and new SIP registrations touched an alltime high of 2.5 million, despite concerns around expensive equity valuations. The total assets under management (AUM) for SIPS also touched a new record of ~5.3 trillion.
Taking note of the strong numbers, analysts have given a thumbs up to the sector.
“MF AUMS have remained resilient through FY21 (financial year 2020-21) despite weaker flows, aided by strong capital markets. We see signs of sustained recovery in equity flows in the past six months, and with SIPS continuing on a growth trajectory (24 per cent growth in August 2021 versus the FY21 run-rate), we find risk-reward turning favourable for AMCS (asset management companies),” said broking firm Nomura in its report. SIP inflows have been more than ~9,000 crore in each of the last three months. Inflows through the SIP route have exceeded ~46,000 crore thus far this fiscal.
Experts say the rally in the markets coupled with the ease of investing through new-age digital platforms have aided SIP flows. In FY21, even when equity funds continued to witness outflows, SIP had remained strong, bringing in nearly ~96,000 crore of net inflows.
SIP is an investing technique wherein the investor commits a fixed sum every month as opposed to investing a large sum at one go.
In the five months of the current fiscal, nearly 10 million new SIP accounts have been opened as compared to 14.13 million in FY21. Industry players believe there is scope for the SIP book to swell further driven by penetration of digital platforms.
“Retail participation has continued to gain momentum, which is visible from the growth in the SIP book over the last few months. Significantly, fintech firms’ contribution to a number of SIPS has grown three times. Although two-thirds are still contributed by traditional channels. I think investors are confident of the continuing economic recovery. Retail investors, in particular, take a long view on equity,” said Aashwin Dugal, co-chief business officer, Nippon India Mutual Fund
Strong SIP flows are a big positive for the industry as this is seen as a sticky way to build AUM. Typically, SIP investors continue with their investments irrespective of market levels. On the other hand, investors putting in lump sums tend to move their holdings more frequently. For instance, equity inflows in August dropped 62 per cent to ~8,667 crore against a record ~22,584 crore in July. However, SIP flows increased month-on-month.
Earlier, SIP investors invested for an average of three years. Now they are staying in for a longer period.
“Looking at the long-term returns of equity funds, investors’ behaviour has seen drastic change. They are willing to stay invested for longer duration irrespective of the market condition,” said a CEO of the top fund house.
Over the past year, large-cap funds have delivered average returns of 55 per cent, and over a 10-year period have generated returns of about 14 per cent. Mid- and small-cap funds have generated average returns of 18-19 per cent in the last 10 years, despite the market volatility. Experts say to generate such attractive long-term returns one has to stay invested and the SIP route is a good way to do so.