The regular inflows from systematic investment plans into mutual funds (MFs), along with debt scheme outflows, has raised the share of SIPs to a new high of 17.1 percent in the month of February, Business Standard reported.
As it is well known, SIPs are primarily used by retail investors. Nearly seven of every 10 SIP accounts are in equity-oriented active MF schemes.
On the other hand, debt schemes receive a fraction of SIP inflows and most of its assets under management (AUM) belong to institutional investors.
Data from the Association of Mutual Funds in India (Amfi) pegs the end-February SIP AUM at ₹6.74 trillion and the industry’s total AUM at ₹39.46 trillion. In the past year, SIP AUM has risen 23 percent, while total AUM has gone up only 5 percent.
Strong SIP inflows are a result of its growing investor base.
SIP accounts from tier 2 cities
In the current financial year (2022-23, or FY23), net SIP account additions from beyond the top 30 (B30) cities have outpaced growth in the top 30 (T30) cities, probably for the first time, said the report.
Until end-February, the industry recorded 5.4 million net SIP account additions from B30 cities, compared to 4.6 million from T30, it added.
Overall, there are 32 million active SIP accounts from T30 locations and 31 million from B30. The number of active SIP accounts was 63 million at the end of February, rising 19 percent in FY23.
The surge in overall SIP accounts has ensured a steady flow of new money into MFs through SIP accounts. SIP investors allocated over ₹11,000 crore every month to MFs in the past 12 months.
The industry’s overall AUM suffered due to outflows from debt schemes. Debt AUM declined 10 percent year-on-year in February to ₹13 trillion.
Fund houses and MF distributors have popularised SIPs in recent years, projecting the monthly investment model as the best way to benefit from volatility in the equity market.
“The whole MF ecosystem, including asset management companies (AMCs) and distributors, have done a lot to promote SIPs. Investors now understand that investing through SIPs will allow them to benefit through the rupee cost averaging,” says Akhil Chaturvedi, chief business officer, Motilal Oswal AMC.
Rupee cost averaging is said to occur when investment is made at regular intervals. The system allows investors to buy more MF units at the same price when the market is low and less when the market is high, bringing down the average cost per unit.
However, the rising traction of SIPs has not diminished the share of one-time investments in equity AUM in the past year.
Hybrid schemes are the second most preferred option among MF investors, with SIP AUM of ₹53,400 crore.