Assets under management (AUM) of mutual fund companies that have come through the systematic investment plan (SIP) route touched Rs 3.36 lakh crore in August, an increase of 17 lakh from a month ago.
The monthly SIP contribution in August fell to Rs 7,792 crore, marginally down from Rs 7,831 crore a month ago.
The data was shared by NS Venkatesh, Chief Executive Officer, Association of Mutual Funds in India in a concall held to discuss AMFI monthly numbers.
Mutual fund experts say that while in the short-term investors may go a bit slow in terms of investments in SIPs, in the long-run, SIPs will reap good returns.
“With SIP flows reducing, it is clear that the retail investor is impacted due to the current economic environment brought on by COVID-19," said Jean-Christophe Gougeon, Director - Investment Solutions, Sharekhan by BNP Paribas.
"In such a challenging economic environment, retail investors tend to reduce their SIP investments and reduce risk on their portfolios by selling equity MFs," he added.
He further pointed out that while the long-term opportunity of mutual funds through both lumpsum and SIP remains very promising, the pain in the short term is not likely to go away soon.
The silver lining is that the mutual fund industry added 11.16 lakh new SIP accounts in August. Almost equal additions were made in the month of July as well. Currently, mutual funds have about 3.30 crore SIP folios through which investors regularly invest in schemes.
In August, benchmark indices Nifty and Sensex rose 2.84 percent and 2.72 percent, respectively.
Overall, the 42-player mutual fund industry manages assets under management (AUM) of Rs 27.7 lakh crore in August, as against Rs 27.2 lakh crore in July.
What is SIP?
SIP is an investment route offered by mutual funds through which one could invest a fixed amount in a mutual fund scheme periodically at fixed intervals - say once a month -- instead of making a lump-sum investment.
An SIP instalment amount can be as small as Rs 500 per month. SIP is similar to a recurring deposit where you deposit a small/fixed amount every month.
It is a very convenient method of investing in mutual funds through standing instructions to debit your bank account every month, without the hassle of having to write out a cheque each time.
SIP has been gaining popularity among Indian MF investors as it helps in rupee cost averaging and also in investing in a disciplined manner without worrying about market volatility and timing the market.
SIPs help the investor average his cost over a period of time, fetching more units when prices are low and fewer units when prices are high.