Systematic investment plan (SIP) contributions have increased from Rs 92,693 crore in 2018-19 to Rs 1,41,696 crore in February 2023, up by 53 per cent over five years, according to data from the Association of Mutual Funds in India (Amfi).
This also indicates their growing popularity, as more people join the market through the SIP route to boost their income from small investments. Guaranteed debt schemes do not provide returns similar to equity-linked investments, which come with market-related risks, but usually provide higher returns in the long term.
The growing popularity of SIPs also indicates a growing risk appetite, as more retail investors seem to have opted for mutual fund schemes over guaranteed fixed deposits.
Technically, an SIP is a recurring mode of investment in mutual funds, which allow investors to invest in various mutual fund schemes, such as equity, debt, large-, flexi-cap, balanced, and liquid funds through a recurring amount instead of a lump sum investment.
Besides being easy on the pocket, SIPs also contribute to disciplined investing habits.
SIPs Drive Mutual Fund Industry Growth
The growing popularity of mutual funds is evident from the industry’s asset under management (AUM), which grew by about 78 per cent over five years from Rs 22.20 trillion as on February 28, 2018, to Rs 39.46 trillion as on February 28, 2023.
In 2014, the mutual fund industry had crossed the milestone of Rs 10 trillion of AUM, and, then in the next three years, it grew to Rs 20 trillion, and in three years again, in 2020, it crossed the AUM of Rs 30 trillion.
In this, SIPs have contributed a big way in the growth of the mutual fund industry and expanded mutual funds’ acceptance and reach among the masses. Retail investors’ share in the SIP AUM has grown from 50 per cent in December 2014 to 59 per cent in December 2022.
Over the last five years, SIP contribution has also constantly grown every year except in FY2020-21, the year of the pandemic. In February 2023, it reached Rs 13,686 crore, and for FY23 until February (March data not yet released), it stood at approximately Rs 1.42 trillion, the highest in five years.
In the same way, the number of SIP accounts increased from 52.73 million as of March 2022 to 62.82 million as of February 2023.
Why SIP Is The New Mantra?
SIPs are becoming popular for various reasons, such as small investment amounts, easy-to-understand products, and ease of investment through intermediaries, banks, agents, and online modes.
One can start an SIP investment with as low as Rs 500.
The other benefit SIPs offer is rupee cost averaging, mitigating risks of market volatility, and offering a suite of schemes ranging from debt funds to high-risk equity funds.
Thus, SIPs with a platter full of options, with different risk appetites and growth potential, have a lot to offer to the retail investors in terms of choice.
The Nifty 50 also grew from 7,000 in April 2016 to nearly 14,000 in December 2022, and SIP flow has, over these years, also followed a similar trajectory. SIPs hold approximately 17 per cent of the mutual fund industry’s average AUM of Rs 40.69 trillion in February 2023, according to a report by Edelweiss AMC.
With market conditions in a turmoil, investors tend to panic and sell their holdings. But in the case of SIPs, the flow has remained steady and it did not witness a bumpy pattern unlike the overall market.
