MFDEx CAMS data says 44.87 lakh new SIPs registered through FY-16
The total number of active systematic investment plans (SIP) accounts in the mutual fund industry has touched an all-time high of one crore, according to two senior officials in the business who did not wish to be named.
According to MFDEx CAMS data bureau services, which tracks about 92 per cent of the MF industry, the number of active SIPs has hit a lifetime high of 88.43 lakh. That’s a massive 35 per cent rise from 65.5 lakh that the data bureau had recorded at the end of March 2016. Computer Age Management Services (CAMS) is a leading registrar and transfer agents for the mutual fund industry.
An SIP is a mutual fund product where an investor – most often an individual – puts in the same amount of money in a particular MF plan every month, which is like saving money in a recurring bank deposit.
Most SIPs are opened by retail investors interested in buying stocks. The benefits of an SIP, over say, a one-time lump sum investment in a mutual fund, are that over the long term it brings down uncertainties of trying to time the market and averages out the investor’s cost of acquisition of fund units.
Even though the benchmark index BSE Sensex fell over 10 per cent through FY15-16, retail investors seem to have remained confident, sticking to their guns through the hard times. According to MFDEx CAMS data, 44.87 lakh new SIPs were registered through FY16; that’s roughly 11 lakh new SIPs that the industry sold every quarter of the last financial year.
A senior official at CAMS said the spurt in SIP creation last year was largely because of the industry’s efforts to enhance investor education about mutual funds, especially in smaller towns. Srikanth Meenakshi, Founder-Director of robo-advisory and MF distributor fundsindia.com, agreed that investor awareness campaigns have done much for the industry.
“It’s not that the economy or the markets are doing spectacularly now, but investors are willing to wait it out.” The average size of an SIP sold on his platform is about ₹3,000 (the monthly investment) while the industry average, according to CAMS data, is around ₹5,000.
Nilesh Shah, MD, Kotak Mahindra Asset Management, believes that the increasing interest in SIPs is to be expected. “Fund managers, investment advisors and distributors have been consistently repeating this message for 15 years. So eventually, it had to reflect in the psyche of investors.” After accounting for SIPs that were closed during the year, the net addition to the live SIP base through FY16 was nearly 23 lakh, according to CAMS data. However, it would be incorrect to assume that all of the 23 lakh accounts represent first-time investors in MFs. Sometimes, an SIP may be rolled-over after its expiry. In this case, the SIP may be new but the investor remains the same.
Shah added that SIPs were particularly attractive last year, despite a falling market, because other investment classes fared worse off. “With a fixed deposit, you don’t know if it will be rolled over at 7 per cent or 3 per cent interest on maturity. Indian investors have bought a lot of gold, but it isn’t giving them much by way of return while real estate is still very expensive.”
Author|Source: Tanya Thomas | Mumbai, May 18 Hindu BusinessLine