Illustration: Ajay Mohanty
Retail investors are increasingly opting for systematic investment plans (SIPs) in mutual funds as the industry garnered Rs 75.54 billion (Rs 7,554 crore) through this route in July, a surge of 53 per cent from the year-ago period.
This followed investments of over Rs 670 billion (Rs 67,000 crore) through SIPs by fund houses in 2017-18 and more than Rs 439 billion (Rs 43,900 crore) in the preceding financial year, according to the Association of Mutual Funds in India (Amfi).
SIPs have been the preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk, the industry body noted.
Further, investors are not showing interest in investing into traditional asset classes like real estate and gold and preferring financial assets such as mutual funds.
"While SIP remains a popular mode of investment, there is need for investor awareness on the advantages of SIP, especially in volatile markets. There are emerging challenges in this space such as premature cancellations of SIP instructions as investors rush to discontinue their SIPs in a falling market," said Stefan Groening, Director Investment Solutions, Sharekhan, BNP Paribas.
According to the latest data, the SIP contribution in July was Rs 75.54 billion (Rs 7,554 crore) -- the same as the previous month.
In comparison, the industry garnered Rs 49.47 billion (Rs 4,947 crore) collected in July last year and Rs 33.34 billion (Rs 3,334 crore) in July 2016.
The latest collection has taken the total inflow through the route to Rs 291.02 billion (Rs 29,102 crore) so far in the current financial year (till July).
MFs have 23.3 million (2.33 crore) SIP accounts through which investors regularly invest in Indian mutual fund schemes. In the current financial year, the industry has added 992,000 (9.92 lakh) SIP accounts each month on an average, with average ticket size of Rs 3,250.
SIP is an investment vehicle that allows investors to invest in small amount periodically instead of lump sum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a small or fixed amount every month.