Investments in mutual funds through Systematic Investment Plans (SIPs) hit a 22-month low of Rs 7,831 crore in July amid market volatility. Inflows through SIP have slowed down in the past four months but experts believe the route still continues to be the preferred one for retail investors to invest in mutual funds as it helps them reduce market timing risk.
Besides, equity mutual funds, which mainly depend on SIP for flows, saw a withdrawal of Rs 2,480 crore, data from Association of Mutual Funds in India (Amfi) showed. This was the first outflow in more than four years. As per the data, the 45-player industry raised Rs 7,831 crore through SIP route last month.
This was the lowest level since September 2018, when investment through the route stood at Rs 7,727 crore. Besides, investment in June 2020 dropped below Rs 8,000 crore for the first time since November 2018. Investment through the route was Rs 7,917 crore in June, Rs 8,123 crore in May, Rs 8,376 crore in April and Rs 8,641 crore in March.
Experts said the slowdown in monthly SIP contribution could be due to the strain on cash flows and incomes experienced by several investors on account of the COVID-19 situation. They further said once the economic situation improves, the flow should also pick up. Harsh Jain, co-founder of Groww, said Indian SIP investors are showing immense resilience amid the ups and downs in the market.
He further said the number of more mature investors who stick through ups and downs using SIPs is also steadily rising. Currently, mutual funds have 3.27 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes. Investments through SIPs have been rising for the last few years.
SIP investment stood at over Rs 1 lakh crore in 2019-20, almost Rs 92,700 crore in 2018-19, over Rs 67,000 crore in 2017-18 and over Rs 43,900 crore in 2016-17. SIP is an investment plan offered by mutual funds, wherein one can invest a fixed amount in a mutual fund scheme periodically at fixed intervals, once a month, instead of making a lump sum investment. It is similar to a recurring deposit where an investor deposits a fixed amount every month.