Retail investments in mutual funds slowed down further for the second successive month in May. Inflows through the systematic investment plan (SIP) route registered a dip of Rs 253 crore. SIP contribution slipped to Rs 8123 crore in May compared to Rs 8376 crore in April 2020, as per the data released by the Association of Mutual Funds in India (AMFI). Around 6.51 lakh SIPs either completed the tenure or were discontinued by investors in May 2020, as compared to 5.4 lakh in April. For May 2019, that number stood at 5.86 lakh.
Uptick in accounts
However, a small uptick is seen in the number of SIP accounts outstanding. Compared to 3.14 crore outstanding SIP accounts in April, the number increased marginally to 3.15 crore in May. Mutual funds saw an increase in the number of new SIP registrations to 8.08 lakh, from 7.5 lakh in April 2020.
Ashish Shah, founder of Ahmedabad based Wealth First Portfolio Managers says, “Salary cuts experienced by employees and fall in the income of professionals in lockdown times have made many investors pause their SIPs. Some have opted to stop their SIPs.” As the uncertainty around income increases for individuals, the risk-taking ability of investors also reduces.
“Investors are seen stopping their SIPs in non-performing equity funds. Some investors, worried about the volatility in equity markets, also started SIPs in bond funds,” says Rupesh Bhansali, head distribution, GEPL Capital.
Volatile stock markets made many investors look away from equity as an asset class.
The Reserve Bank of India cut the policy rate by 40 basis points to 4 percent to revive sentiments. The banking sector regulator also extended the moratorium on loans by three more months, clearly signaling the fatigue in the economy. However, there is very low possibility that the economy will quickly go back to growth rates of pre-COVID times. CRISIL has predicted that the Indian economy would shrink by 5 per cent in financial year 2020-2021, due to the COVID-19 pandemic.
Bhansali expects investors to eventually come back to equity funds through the SIP route, as other asset classes are either unattractive or are not accessible. “Returns on bank fixed deposit have fallen. Gold has run up too fast and real estate is beyond the reach of most investors,” Bhansali says. He recommends systematic investments in index and large-cap funds.
Shah advises investors to stay put at this time. “If you average your purchases using SIPs in equity mutual funds when the markets are down, in the long-term you will get good returns,” he says.
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