Surpassing the earlier highest figure of Rs 8,641 crore accomplished in March 2020, the total dollars inflow in Mutual Fund (MF) schemes although Systematic Investment Plans (SIPs) has registered a spike in March 2021 to touch the highest ever level of Rs 9,182 crore. The SIP inflow of Rs 9,182 crore witnessed in March 2021 was a robust one in comparison to the total SIP inflow of Rs 7,528 crore in February 2021.
“Investments in SIP have increased significantly in the last two months. The total SIP investments accounts stood at approximately 3.72 crores as on March 2021. In the month of March, Rs 9182 crores were collected in various SIP schemes,” stated S Ravi, former Chairman of Bombay Stock Exchange (BSE) and Founder and Managing Partner, Ravi Rajan & Co.
“SIP is a way of deploying fixed amounts at regular intervals. The investment amount in a SIP can be as low as Rs 500. A systematic investment plan is an investment vehicle which many mutual funds offer. These intervals are decided by the investors and are either weekly, monthly or quarterly,” he added.
But what could be the factors behind such a big spike of about 22 per cent in SIP inflows in March 2021?
“Investments strategies and decisions depend on the economic cycles and phase prevailing at the time of investing. Investing in stocks should be research based. Time period and stock prices which are subject to flux are countered by investment decisions,” stated Ravi.
“The reason for this increase is due to the multiplicity of factors like market performance, poor returns in bank fixed deposits (FDs), no TDS (tax deducted at source) etc. The recent budget announcement making Provident Fund (PF) contributions over Rs 2.5 lakh taxable could be an additional factor. The performance of mid cap which is an average yield over 12 per cent has made SIP’s very attractive,” explained Ravi.
Apart from the low FD prices and adjust in PF tax guidelines pushing the conservative investors towards MF investments by means of SIP, some also think that the adjust in NAV applicability rule could also outcomes in spilling of some investment dollars from February to March.
March Mutual Fund inflow: Did the adjust in NAV applicability rule contribute to the spike?
Adoption of technologies for quick onboarding of new consumers could also have played some part in the spike.
“Mutual funds have made the investing process easier. Electronic clearing by way of banking instructions or by investing via app which is linked to bank account and online investments through the web portals,” stated Ravi.
Moreover, compared to lump sum investments in equity MF schemes, investing by means of the SIP route is regarded much less risky as investments are made in each upmarket as effectively as in downmarket cycles. Which could have encouraged the conservative investors to take some calculated dangers.
“Rupee cost averaging over a period of time is a favourable investment vehicle as there is time diversification. However, in bull markets, value of the investments are at premium while in bear markets investors are able to accumulate more units at lower data points. Hence market volatility is countered with no fear and investments over a longer time horizon yield better returns. Investments are tax efficient and counters inflation,” stated Ravi.