Mutual fund investment via SIP rises to over Rs 50,000 cr in H1 2020

Investment in the month of June dropped below Rs 8,000 crore for the first time since November 2018.

Investors continue to prefer SIP option for investing in mutual funds, as the industry garnered over Rs 50,000 crore through this route in the first six months of 2020, up 3 per cent from the year-ago period. This rising trend is in contrast with the extreme volatility in the broader market amid concerns over the impact of COVID-19. Systematic investment plan or SIP has been the preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk.

According to the Association of Mutual Funds in India (Amfi), SIP contribution in January to June 2020 rose to Rs 50,102 crore from Rs 48,757 crore in the first half of 2019. Inflows into SIPs have averaged about Rs 8,350 crore in the past 6 months. Harsh Jain, co-founder of Groww, said that Indian SIP investors are showing immense resilience amidst the ups and downs in market. Clearly, SIP as a medium has gained immense popularity, he said.

However, inflows through SIP have slowed down in the past three months. Investment in the month of June dropped below Rs 8,000 crore for the first time since November 2018. Net investments through such route stood at Rs 7,927 crore in June as against Rs 8,123 crore in May, Rs 8,376 crore in April. Prior to this, it was Rs 8,641 crore in March, Rs 8,513 crore in February and Rs 8,532 crore in January.

Experts said the slowdown in monthly SIP contribution could be due to strain on cash flows and incomes experienced by several investors on account of the COVID situation. They, further, said that once the economic situation improves, the flow should also pick-up. Currently, mutual funds have 3.23 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes.

The 45-player mutual fund industry, which mainly depends on SIPs for inflows, witnessed an investment of over Rs 42,400 crore in equity oriented schemes in the first six months of the year. SIP is an investment vehicle that allows investors to invest in small amounts periodically instead of a lump-sum payment. The frequency of investment is usually weekly, monthly or quarterly. It is similar to a recurring deposit where investors deposit a fixed amount every month.