The SIP culture is catching on

By Ravi Samalad |  26-03-18 | 
 
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About the Author
Ravi Samalad is Assistant Manager - Editoral for Morningstar.in.

This post initially appeared on Moneycontrol.com

There are two trends which are positive for the mutual fund industry.

The first is that they are realizing the benefits of staying put for the long term. The latest data from Association of Mutual Funds in India, or AMFI, shows that 1.17 crore Systematic Investment Plans, or SIPs, worth Rs 39,870 crore, were active for more than five years.

The second is that investors are gravitating towards systematic investing. As on February 2018, the industry had Rs 2.01 lakh crore worth of assets under SIPs.

The net inflows from SIPs was worth Rs 43,921 crore in FY17 which has increased by 37% to Rs 60,071 crore in the current fiscal so far. The number of new SIP registrations as well as the monthly quantum of inflows is increasing steadily.

In the month of April 2017, mutual funds collected Rs 4,269 net inflows from SIPs which has gone up to Rs 6,425 in February 2018.

According to registrar Computer Age Management Services, or CAMS, of the 40.88 lakh new SIP accounts registered in FY18 (April 2017-December 2017), 2.73 lakh SIPs came in direct plans while the remaining came through distributors.

Of the new SIPs registered by distributors, 11.70 lakh SIPs were created by Independent Financial Advisers while national distributors created 10.55 lakh new SIPs. Do note, CAMS figures represent 64 % of the industry data.

Here are some statistics:

  • The number of SIP accounts have gone up by more than 50% from 1.35 crore in FY17 to 2.04 crore as on February 2018.
  • The industry added 75.19 lakh new SIP accounts in FY17.
  • In FY18, till February 2018, the industry added 1.06 crore new SIPs.
  • AMFI data shows that the industry has added about 9.72 lakh SIP accounts each month on an average during FY 2017-18, with an average SIP size of about Rs 3,130 per SIP account.

Catalyst for the SIP culture

While advisers have been popularizing this concept, there are other factors at play too.

The growing popularity of SIPs could be attributed to increased awareness about mutual funds and advancement of technology which has led to faster transaction execution. Many distributors promote SIP as an ideal way to accumulate wealth. It is becoming a preferred investment technique among the masses, especially the salaried class.

Moreover, operational ease has also led to registering SIP accounts faster. Today, Know Your Customer, or KYC, compliant mutual fund investors can start a SIP in a few minutes either through AMC websites, apps or the numerous online investing platforms.

Moreover, processing KYC for first-time mutual fund investors has become seamless with the enabling of biometric Aadhar based KYC. Many distributors are using the Biometric-eKYC tools to process KYCs on the go.

Even the One Time Password, or OTP, based Aadhar KYC (for investments limited to Rs 50,000 per annum) can be done in a few minutes through R&T websites.

Further, many online investing websites allow investors to modify, pause or increase SIP commitments at the click of the button which is proving very convenient for investors.

The SIP culture will get a further boost once bank KYC is accepted by mutual funds to start a mutual fund account. The good news is that regulators are already working in this direction.

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