Mutual funds SIP influx in India

Mutual funds SIP contributions through SIPs have crossed ₹50 lakh crores. Here are the possible reasons.

Mutual funds SIP are among the most preferred investment avenues, especially for novice investors in the financial market. Due to the increasing knowledge of financial planning and the importance of financial freedom, the number of people developing the habit of saving is on the rise. The effect of this rise is now observed in the mutual fund market, too.

Today’s article takes you through the current investment trends in mutual funds through SIPs and the possible reasons for the increased inflow.

India’s mutual funds SIP market

The mutual funds SIP market in India is over 60 years old. It all began in 1963 with the establishment of Unit Trust India, an initiative by the Indian Government and the Reserve Bank of India. The first mutual scheme was launched by the UTI in 1964.

Over the next two decades, public sector companies entered the mutual funds SIP market. A new era began when private players entered the market in 1993. This is when Mutual Fund Regulations formally began, which are now jointly handled by the SEBI (Securities and Exchange Board of India) and AMFI (Association of Mutual Funds in India).  

The mutual funds SIP market is gigantic today and has achieved a new milestone, with the Assets Under Management (AUM) reaching ₹54.54 lakh crores.

The mutual funds SIP market has been growing over the years. However, the last few years have witnessed phenomenal growth. From about ₹23 lakh crores in 2019, the assets under management have almost doubled to cross ₹50 lakh crores in the last five years.

Source: AMFI

The increasing inflow of mutual funds SIP

Mutual funds allow two popular modes of investments – through SIPs (Systematic Investment Planning) and the lump sum method.

The rising assets under management are because mutual funds SIP investors have increased, too. The spike in the inflow of contributions through SIPs is proof of this rise.

January 2024 received an SIP contribution of ₹18,838 crores. January 2023 received ₹13,856 crores, indicating a 37% increase this year. February 2024 has surpassed the previous month and recorded an inflow of ₹19,187 crores, the highest monthly inflow through SIPs to date.

Besides, the number of newly registered SIPs also reached an all-time high, with 51.84 lakh accounts registered in January 2024. Despite a dip in February, the current year has noted a significant number of new investors, and the total number of active accounts has reached 820.18 lakhs this year, from April 2023 to February 2024.

SIP contribution in mutual funds
Year	SIP inflow (in crore ₹)
FY 2016-17	43,921
FY 2017-18	67,190
FY 2018-19	92,693
FY 2019-20	1,00,084
FY 2020-21	96,080
FY 2021-22	1,24,566
FY 2022-23	1,55,972
FY 2023-24 (Till February)	1,79,948

Growth in the number of active SIP accounts
Year	No. of outstanding SIP accounts
FY 2021-22	527.73
FY 2022-23	635.99
FY 2023-24 (Till Feb)	820.18

Potential reasons for the spike

Industry experts believe that the potential of the mutual funds SIP market is huge and is yet to be fully tapped. The penetration so far can be attributed to various reasons, including the efforts towards increasing financial literacy among Indians.

• One of the possible reasons is the recent gains that investors have made in financial markets, especially in equity-related schemes. This could be a major motivation for them to continue investing while also developing the habit of regular investments through SIPs.

• Awareness about financial planning and achieving financial freedom early on may possibly be another significant booster for investors’ inclination towards SIPs. Wealth generation is possible through equity investments while limiting risks by choosing the mutual fund mode to invest in.

• Experts also believe that the increased awareness and behavioral shift are also backed by rising disposable income, leading to an increase in investments.

• Besides the above factors, the convenience of investing and professional management of funds offered by asset management companies are attractive to most investors. Not every investor is open to taking risks or spending the whole day trading in the financial market. The mutual funds SIP market is ideal for all such investors, who want to limit their risks, diversify their portfolios and allow experts to handle their funds.

Why should you start an SIP?

Source: India Times

The general benefits of SIPs are usually appealing to investors of all kinds, including beginners and experienced ones.

• The primary benefit of investing through SIPs is that it promotes the habit of saving among investors. Hence, it is always suggested to start a SIP as early as possible.

• Unlike lump sum investments, SIPs do not burden investors. You can start SIPs with periodic instalments as low as ₹500. Investors can increase the SIP later when the earning potential increases.

• SIPs in mutual funds allow asset management companies to handle funds. So, the money is managed by professional fund managers with expertise in wealth generation. This allows investors to escape the stressful stock market tracking and analysis.

• SIPs allow investors to hold a diverse portfolio as fund managers invest the collected money across different assets. Diversification is one of the fundamental risk-mitigating strategies in the financial market.

• SIPs provide the benefit of rupee cost averaging. Rupee cost averaging is where fund managers buy more units when the price is less, and less number of units when the price is more. So, the impact on the investor is not severe and is averaged out through the term of the SIP.

• SIPs also give investors the benefit of compounding. Usually, SIP returns are invested back into the fund, allowing investors to earn higher returns.

Bottomline

The mutual fund market is currently at the top of its investment game, with more and more participants entering the field every month. The benefits of SIP and the importance of wealth generation are two significant contributors to this.

SIPs offer great flexibility to investors, with respect to the type of fund, the SIP amount, duration and other terms, making it one of the most sought-after investment methods. The increased inflow of funds and the number of participants show that the market is flourishing. 

So, if you have not started your SIPs yet, wait no further – here is your sign to do so! But remember to assess your goals, risk potential and the mutual fund scheme thoroughly before putting in your money. Happy investing!

DISCLAIMER: This article is not meant to be giving financial advice. Please seek a registered financial advisor for any investments.