Mutual fund industry crosses five-crore-SIPs-mark for the first time

The systematic investment plans (SIPs) in mutual fund (MF) industry crossed the five crore-mark in January even as market volatility pulled back the investor flows received by equity schemes.

The MF industry saw 26 lakh new SIPs being opened in January, showed AMFI data. This was higher than the average 24 lakh SIPs added by industry in past five months, industry executives say the long-term trends indicate that investors now understand the importance of SIPs.

“We have seen investors now being more mature and willing to continue their SIPs despite market ups and downs. Investors who have come in over last 4-5 years have seen the benefits of staying invested in equities and see through market volatility,” says Neil Parikh, chief executive officer of PPFAS MF.

The stock markets have been volatile and this may be holding back some investors from opening fresh SIP accounts.

The market indices – S&P BSE Sensex and CNX NSE Nifty – have corrected four percent each, since January 17.

SIP account opening during January-March is also impacted as investors are finalising their tax-saving investments.

“The surpluses with investors tend to be low around Jan-March period as they are making their  tax-planning investments in equity linked saving schemes or insurance policies. So, fresh account opening numbers can fluctuate depending upon market conditions and other factors, what is important is to see the SIP contributions coming into the industry,” points out Rajiv Shastri, chief executive officer of NJ MF.

The monthly SIP contributions to mutual fund industry has been growing steadily. In January, monthly SIP contributions stood at Rs 11,516 crore, which was about two percent higher than previous month.

Should you continue your SIPs?

Financial planners say that it is important that investors continue their SIPs during market volatility.

“SIPs give investors the benefit of rupee cost averaging. So, when markets correct investors accumulate higher number of units at lower prices and when markets rally they fetch lesser units at higher price in the same SIP,” says Amol Joshi, founder of Plan Rupee Investment Services.

This helps investors to keep their average buying price lower and also allows them to build a large corpus over time through staggered investments.