Steady SIP Investment Flow Is A Sign Of Market Maturing

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Steady SIP Investment Flow Is A Sign Of Market Maturing
Yagnesh Kansara - 13 December 2019

Mumbai, December 13: Indian equity market is maturing and is gradually moving to the level of developed countries’ capital market. The indication to this effect was available from the investment data provided by the Association of Mutual Funds in India (Amfi). It said, the amount collected by way of Systematic Investment Plan (SIP), the money collected mainly from retail and high networth individuals (HNIs) and predominantly invested in equities every month, has cumulatively reached Rs 3.12 lakh crore (approximately $ 44 billion).

The total amount collected through systematic investment plans (SIPs) in November was at a record high of Rs 8,272.87 crore, as against Rs 8,246 crore in October. SIPs allow people to invest fixed amounts in mutual fund schemes at fixed intervals.

N S Venkatesh, chief executive officer (CEO), Amfi said, “Money put into goal-based, long-term SIPs by retail investors continues to grow steadily, with SIP asset under management (AUM) at an all-time high of Rs 3.12 Lakh crore. Equity net inflows have come down sharply in November, partly because of investors booking profits, but the overall mutual fund industry AUM reached an all-time high of Rs 27 lakh crore."

“With SIP inflows averaging out at Rs 8,000 crore, the annual amount works out to be around Rs 1 Lakh crore. These flows are becoming as a “Balancing Factor”, against the liquidity flows provided by the foreign portfolio investors (FPIs). We don’t say we don’t need FPI flows, but yes in its absence, SIP is a force to reckon with. But FPI liquidity is always welcome as adequate liquidity helps in efficient price discovery which ultimately leads to healthy stock market”, Venkatesh said.

In November, FPIs pumped in $2.9 billion, keeping the stock markets buoyant. Meanwhile, domestic institutional investors, which include mutual funds and insurance companies, sold equity shares worth Rs 7,970.29 crore, the steepest sell-off in eight months.

The average net investment by the FPIs in last 3-4 years has been Rs 35-40,000 crore per year, against this the funds raised from the domestic market and investors is almost three times, said market observers.

Commenting on the strength and the importance of SIP investment flows, Joseph Thomas, Head of Research, Emkay Wealth Management said, “Foreign investors were dominating the Indian space 5-10 years ago. This situation is gradually getting altered and as the domestic flows from retail and high networth individuals is getting stronger with every passing month. These flows are providing strength to the domestic market. Though FPIs invest with keeping in mind the long term story, a part of it is always considered hot money. The domestic funds raised in the form of SIP can effectively take care of such hot money in the event of flight of such capital”.

He also said, steady flow of funds raised from the domestic market, from the domestic investors (retail & HNIs) is also a sign that India as an emerging market inching closer to get the characterisctic of a developed and matured equity market. With Indian market’s ability to attract more amount of liquidity, the volatility in the market can be contained. Also, adequate-ample liquidity can also help in better price discovery for the stocks-sector,” he concluded.

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