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Many retail investors have preferred to use Systematic Investment Plans (SIP) to invest in mutual funds over the last six years, resulting in sustained growth in monthly investments. But the Covid-19 pandemic has impacted the inflow, which has declined gradually since this April. The monthly SIP investment of ₹7,302 crore in November 2020 was the lowest since May 2018.
SIPs in mutual funds are preferred by retail investors who invest a fixed sum at regular intervals, in the scheme of their choice, thus imbibing discipline in their investment process. But the monthly investments since May 2020 have been lower compared to the corresponding month in the previous year. This gap expanded to 11.74 per cent in November this year.
Key reason
This decline in SIP investments could be due to profit booking induced by the large rally in stock prices, say experts. “The strong performance of the equity markets in November seems to have encouraged more investors to book profits and move to short-term investments. We still believe that there is significant amount of money that can come back to the market in the event of any correction. The medium-to-long-term potential of the equity markets remain strong,” says G Pradeepkumar, CEO, Union AMC.
Kumar, however, thinks that the decline in November was because the last three days of November were non-business days. “A significant amount of SIP flows might not be reflected in the official numbers that have been released (in November).”
SIP accounts increase
Experts also point out that while investments through SIPs may be reducing, many new SIP accounts are being opened, indicating continued investor interest. The number of SIP accounts increased from 3.37 crore towards the end of October 2020 to 3.40 crore towards November-end. “It is significant to note that there has been a healthy addition of 3.39 lakh SIP accounts.” says NS Venkatesh, Chief Executive, AMFI.
Assets under management of SIP accounts also registered an increase of 10 per cent in November to ₹3,78,286 crore compared to the previous month. A part of the increase in assets could be due to the increase in the net asset value of the MF schemes, due to the strong rally in equity markets. Overall assets managed by mutual funds had increased to ₹30-lakh crore towards November-end, an increase of 6 per cent compared with October.
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