Mutual funds garner over Rs 1 lakh cr in FY20 with big bets on SIPs

Investors are preferring SIP option for investing in mutual funds, as the industry garnered over Rs 1 lakh crore through this route in 2019-20, up 8 per cent from the preceding fiscal, even as the broader market witnessed extreme volatility amid concerns over the impact of coronavirus pandemic.

Systematic investment plan or SIP has been the preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk.

According to the Association of Mutual Funds in India (AMFI), SIP contribution in the just concluded fiscal 2019-20 rose to Rs 1,00,084 crore from Rs 92,693 crore in 2018-19.

Inflows into SIPs have averaged about Rs 8,200 crore in the past 12 months.

Investors are showing great maturity in handling this downturn by sticking to SIPs, said Harsh Jain, Co-founder and COO of Groww.

“It is very encouraging to see the faith with which a lot of retail investors have continued to put their trust behind mutual funds through SIP route. Number of SIP accounts has kept up the pace of growth with increase of 19 per cent between March 2019 and March 2020,” said G Pradeepkumar, CEO Union AMC.

N S Venkatesh, Chief Executive, Amfi said,”Unprecedented situations warrant equally unprecedented response, to help make the most of the crisis an opportunity. This precisely sums up the retail investor riposte. Instead of exiting their investment in equity funds, retail investors have not only held on, but added more AUMs and folios, through SIPs”.

Over the past few years, inflows through SIPs have been showing an upward trend. Investments of over Rs 67,000 crore through the mode were seen in 2017-18 and more than Rs 43,900 crore in 2016-17.

Currently, mutual funds have 3.12 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes.

The industry, on an average, added 9.95 lakh SIP accounts each month during the last financial year, with an average ticket size of Rs 2,750.

The 44-player mutual fund industry, which mainly depends on SIPs for inflows, had assets under management (AUM) of Rs 22.26 lakh crore at the end of March this year, as compared to Rs 23.8 lakh crore in March-end 2019.

SIP is an investment vehicle that allows investors to invest in small amounts periodically instead of a lump-sum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a fixed amount every month.