For mutual fund investors, one of the most popular routes to invest is via a systematic investment plan (SIP). It not only enables investors to make the most of rupee-cost averaging but also accelerates the pace of wealth creation.
Most retail investors prefer to invest in mutual funds via SIPs. By sparing a small amount for mutual funds (for example, ₹1,000), investors can imbibe an investing discipline. No wonder then this route of investment has become fairly popular among retail investors.
However, in August, inflows into systematic investment plans (SIP) hit ₹28,265 crore, marginally lower than the corresponding data for July. Although SIP in August jumped 20 percent year-on-year, for July, the year-on-year growth was slightly higher at 22 percent. Additionally, SIP assets now comprise 20.2 percent of the overall industry assets against 20.6 percent in June, according to the latest AMFI (Association of Mutual Funds in India) data. So, can one argue that SIPs are losing their sheen, albeit gradually?
We asked a few experts to learn more about this.
| Month | SIP ( ₹crore) |
|---|---|
|
April |
26,632 |
| May | 26,688 |
| June | 27,269 |
| July | 28,464 |
| August | 28,265 |
Preeti Zende, founder of Apna Dhan Financial Services, says that this (decline) is because of volatility in the market, prompting some investors to discontinue their investment plans.
“Those who have come into the market after getting impressed by fantastic recovery and a bull run have become disillusioned. Such people never saw the correction and may be closing their SIP out of fear,” she explains.
Too early to conclude?
Some experts also assert that the decline of ₹200 crore is too small to indicate a trend.
“I do not think a decline of about ₹200 crore on a base of nearly ₹28,400 crore is meaningful enough to be seen as a trend reversal. It is far too marginal and doesn’t indicate that SIPs are losing their sheen. In fact, SIP inflows have remained resilient even though the broader mutual fund industry has seen some slowdown,” says Sachin Jain, managing partner of Scripbox.
Raghavendra Nath, MD, Ladderup Asset Managers, echoes the same sentiments. “Though net flows into equity mutual funds saw a marginal dip in August compared to July, this cannot be viewed as a start of a declining trend as the monthly SIP contributions have grown month after month. SIP AUM continues to rise steadily, reflecting the disciplined investment behaviour of retail investors. Strong DII flows also highlight the underlying confidence in India’s long-term equity story amidst global uncertainties,” he says.
Seasonal factors
Some also believe that slight moderation may have occurred on account of seasonal factors.
“The slight moderation in y-o-y growth (20%) versus July (22%) is more likely due to seasonal factors—such as tax outflows, festive spending, or temporary liquidity pressures—rather than any decline in investor appetite. More importantly, investor behaviour has evolved, with SIPs increasingly perceived as a long-term, goal-driven strategy rather than a short-term market-timing instrument. Provided equity markets stay stable, and household incomes continue to rise, SIP flows should remain healthy and structurally strong, with minor month-to-month fluctuations having little bearing on the bigger picture,” says Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research (India).
Sachin Jain, managing partner of Scripbox expresses similar views when he says, “August had a number of holidays and long weekends, which sometimes led to delays in SIP debit dates. For example, if a debit expected on the 5th gets pushed to the 8th or 9th, it raises the chances of insufficient balances in bank accounts and hence higher SIP bounce rates. These factors are short-term in nature and don’t necessarily reflect investors losing confidence in SIPs.”
To sum up, marginal decline in SIPs does not speak of a bigger trend. And investors, recommend experts, can use the ongoing volatility to increase their exposure. “SIPs work best in such a market and can generate good returns in the long term,” says Ms. Zende.
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