Mutual funds Industry 3.30 crore SIP accounts as on August 31
AUM of mutual fund companies that have come through the systematic investment plan (SIP) route touched Rs 3.36 lakh crore in August, an increase of 17 lakh from a month ago.
The monthly SIP contribution in August fell to Rs 7,792 crore, marginally down from Rs 7,831 crore a month ago.
The data was shared by NS Venkatesh, Chief Executive Officer, Association of Mutual Funds in India.
Mutual fund experts say that while in the short-term investors may go a bit slow in terms of investments in SIPs, in the long-run, SIPs will reap good returns.
“With SIP flows reducing, it is clear that the retail investor is impacted due to the current economic environment brought on by COVID-19,” said Jean-Christophe Gougeon, Director – Investment Solutions, Sharekhan by BNP Paribas.
“In such a challenging economic environment, retail investors tend to reduce their SIP investments and reduce risk on their portfolios by selling equity MFs,” he added.
He further pointed out that while the long-term opportunity of mutual funds through both lumpsum and SIP remains very promising, the pain in the short term is not likely to go away soon.
The silver lining is that the mutual fund industry added 11.16 lakh new SIP accounts in August. Almost equal additions were made in the month of July as well. Currently, mutual funds have about 3.30 crore SIP folios through which investors regularly invest in schemes.
In August, benchmark indices Nifty and Sensex rose 2.84 percent and 2.72 percent, respectively.
Overall, the 42-player mutual fund industry manages assets under management (AUM) of Rs 27.7 lakh crore in August, as against Rs 27.2 lakh crore in July.
Equity mutual funds witnessed an outflow for the second straight month as investors continue to cash out in a market that has recovered bulk of the pandemic-fuelled losses despite mounting infections and dire economic forecasts. Equity and equity-linked schemes witnessed an outflow of Rs 4,000 crore in August compared with an outflow of Rs 2,480 crore in July, according to data released by the Association of Mutual Funds in India.
Net investments into such stock plans have been dwindling for months as investors reduce holdings amid worries that the worst impact of the coronavirus may not have passed even as equities continue their ascent. Indian benchmarks have jumped more than 50% of their March low. The Nifty 50 gained 3% in August.
All segments witnessed an outflow in August. Among schemes, investors pulled out the most from large caps. Mid and small caps witnessed outflow for the second straight month, while multi caps for the third. AMFI started releasing granular data in April 2019.
Contribution through systematic investment plans fell for the fifth straight month. Net investments into such schemes stood at Rs 7,791.6 crore in August compared with Rs 7,831 crore in July.
“This is general investor behaviour – post-recovery, we generally see outflows. This was also seen post-recovery from the global financial crisis. This is also a function of the uncertain environment where markets recovered significantly but we are still seeing significant negative data for virus and the economy.
We have seen multiple market participants advising caution, and this is a cautious stance of the investors,” Santosh Kumar Singh, head of research at Motilal Oswal Asset Management Company, said. But “I do not see it as a long-term trend. Once we see clarity emerging we would again start seeing inflows in the asset management industry given financialisation of assets”.
According to G Pradeep Kumar, chief executive officer at Union Asset Management Company, while investors have continued to book profits from equity mutual funds about 4.65 lakh new folios were added in August, indicating sustained retail interest in mutual funds.
Again, though the SIP amount has dropped very nominally, there is a net addition of about 3.43 lakh SIP folios. “It also appears that some investors have taken a tactical asset allocation call by moving from equity to low-duration or ultra short-term funds with the objective of re-entering equity funds at lower levels in the event of a correction in the markets,” Pradeep kumar told.