SIP inflows decline for a sixth consecutive month

The systematic investment plan (SIP) inflows dropped for the sixth consecutive month in the month of September 2020 to Rs 7,788 crore. The same was Rs 7,792 crore in August 2020, Rs 7,831 crore in July 2020, Rs 7,917 crore in June 2020, Rs 8,123 crore in May 2020, and Rs 8,376 crore in April 2020.

Experts believe that such a decline has been caused due to the current economic conditions.

The layoffs and pay cuts have led many investors to pause their SIPs. The returns from SIP seem to be poor for investors with a three to five-year investment horizon. This also has led investors towards redemptions.

As the first-time investors are moving towards direct equity, the fresh SIP inflows have disrupted. During the semi-annual period of April 2020 to September 2020, almost 63 lakh new Demat accounts were added as compared to 27.4 lakh accounts during the same period of the previous year. This is an increase of around 130 per cent.

Having said, many experts feel that in the coming days, revival in these SIP numbers can be witnessed.

The good sign is that many investors, who were bank fixed deposit (FD) investors till now, are turning towards mutual funds and investing in safer debt mutual funds such as, banking and PSU debt funds as well as corporate debt funds. Even the younger crowd is more inclined towards mutual funds. Therefore, we are likely to witness SIP numbers that are improving significantly in the coming months.

Overall, the SIP asset under management (AUM) ascended to Rs 3.35 lakh crore in September 2020 from Rs 2.75 lakh crore in April 2020. This was largely due to the mark to market gains in equity-oriented mutual funds.