Despite strong volatility and fragile market sentiment, inflows in Systematic Investment Plan (SIP) stood at a fresh all-time high of ₹13,573 crore in December, higher than the inflows of ₹13,306 crore in November and ₹13,041 crore in October.
In December 2022, the equity benchmark Sensex fell 3.6 percent and Nifty50 declined 3.5 percent.
As Mint reported, inflows in SIPs have stayed above ₹13,000 crore mark for the third time in a row now. Plus, this was the 16th month when SIPs inflows were above ₹10,000 crore.
What is boosting SIP inflows?
Short-term market volatility appears to have pushed retail investors to adopt a more disciplined way of investing while the long-term outlook of the market remains healthy.
Domestic investors have faith in the Indian market which outperformed developed markets and several of its emerging market peers despite multiple headwinds last year.
Growing awareness about the benefits of investing through SIPs also contributed to the rise in inflow via SIPs.
“Various awareness campaigns across the years have familiarized investors with the benefits of SIPs i.e. disciplined investing, rupee cost averaging and long-term wealth creation. If one considers the experience of the past three years, investors who continued with SIPs have seen encouraging returns. Investors seem to be using the market volatility to invest at lower levels through SIPs,” said Manish Mehta, Head - Sales, Marketing and Digital Business, Kotak Mahindra Asset Management Company.
"Given the market volatility, investors continue to show maturity in their investment behaviour by continuing their SIP investment. When markets are high, the industry sees fewer SIP redemptions and at lower market levels, it is SIPs plus additional purchases,” said Mehta.
Umesh Kumar Mehta, CIO, SAMCO Mutual Fund, observed that the asset management companies (AMCs) and mutual fund distributors (MFDs) have been driving SIPs for a better investment experience which has also helped the industry to grow and sustain the SIPs.
Why continue SIPs?
SIPs are always considered an ideal route for investing for retail investors when the market outlook is hazy.
Due to sticky inflation and rate hikes, the risk of a recession in the West is high. Even though India is expected to be less affected by the slowdown, it cannot avoid the spillover effect on export which will widen the trade deficit.
Besides, due to Fed rate hikes, the market may see a long phase of capital outflow by foreign investors. This is also a negative factor for the domestic market.
SIPs are one of the best ways to accumulate wealth and the true benefits of SIPs emerge during volatile times.
As Mehta of SAMCO Mutual Fund pointed out, "SIPs help investors to invest through all the ups and downs of the market. Retail investors should continue their SIPs and take advantage of the volatility of the markets. SIPs also allow investors to invest their monthly incomes in a disciplined manner. This helps them save money and invest in an inflation-beating asset i.e. equities, which otherwise would have been expended."
"Market falls or fluctuations for months in a row can be perplexing at times, but what we have seen in equities is that it rewards those with discipline and patience handsomely in the long term. Investors should continue their SIPs through the market volatility in order to reap the fullest gains of this whole system approach of investing in equities," said Sriram B.K.R., Senior Investment Strategist at Geojit Financial Services.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.