By no means, it was an aberration. Interestingly, in each of the past five months starting July 2023, the previous record of SIP inflows in mutual funds was broken in the following month.
Overall, SIP inflows in mutual funds reached ₹1,66,131 crore in the first 11 months of 2023 ending Nov 30, thus reporting an increase of 22.23 percent vis-a-vis corresponding period of last year.
Spike in SIP
One might wonder as to why SIP contributions reach an all-time high with each successive month. It is no brainer that the ongoing bull run in financial markets played a significant part in it. Both market indices Sensex and Nifty 50 hit new highs on Tuesday.
And retail investors, upon witnessing increase in their portfolio, are incentivised to invest more money into mutual funds, preferably via SIP route.
“Some investors have tasted success, and are now raising their contribution. Then, there are additional investors who have forayed into equity. In 2020, 2021 and 2022, markets rose and as a result, a growing number of investors now want to invest in equity. Market penetration, consequently, is increasing. As long as the market is good, investors will increase their SIP contribution. Conversely, when the market declines, such as in the last quarter of calendar year 2021, SIP contribution also suffers — a practice investors should ideally refrain from,” says Sridharan Sundaram, founder of Wealth Ladder Direct.
| Year | SIP inflows till Nov ( ₹crore) | Increase |
| 2023 | 1,66,131 | 22.23% |
| 2022 | 1,35,864 | 32.2% |
| 2021 | 1,02,711 | — |
(Source: AMFI)
Shift in attitudes
PGIM India Mutual Fund’s CEO Ajit Menon believes that the growing popularity of SIPs can be attributed to a host of factors including attitudinal & behavioural shift among investors, rising disposable income and strong markets.
“A recent Retirement Readiness Survey conducted by us reveals that people have undergone some attitudinal and behavioural shifts especially post the pandemic. We believe that this attitudinal shift combined with rising disposable income, strong markets and increasing digital adoption is attracting new investors into the MF fold. Further, the awareness campaigns by AMFI, fund houses and financial advisors on the ease and convenience of SIPs have acted as a multiplier,” says Mr Menon.
Convenience of investing
Another key advantage of investing in mutual funds via SIPs is the convenience it offers of investing in regular intervals i.e., every month or week instead of coughing up large amounts in one go.
“Mutual funds are suitable for all types of investors having ultra-short, short, and long-term horizons. SIP is a great tool to invest in a staggered manner allowing investors to invest small amounts periodically i.e. weekly, monthly or quarterly,” says Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services.
“Investors understand that mutual funds offer risk management better than direct equity. They also know that SIP provides the benefit of Rupee Cost Averaging. In the current scenario, India’s growth rate in terms of GDP is promising,” she adds.
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Published: 20 Dec 2023, 10:50 AM IST