SIPs gain popularity as MF investors pin hope on recovery

MUMBAI: Investors have latched on to Systematic Investment Plans (SIPs) of mutual funds in a big way in 2015-16. Data from CAMS shows that new SIP registrations for the financial year were 29.79 lakhs, up by 26% over the previous year.

Live SIPs are up to 57.95 lakhs up by 32% and the average SIP size has moved up marginally from Rs 3368 to Rs 3450. CAMS serviced funds cover 61% of the mutual fund industry.

“The Growth of SIPs indicates rising interest of investors towards financial assets on ground of spur in economic activity, improvement in macro-indicators,” says Nimesh Shah, MD and CEO, ICICI Prudential Mutual Fund.

Wealth managers point to a number of reasons for the sharp rise in SIPs. “Lower deposit rates in banks and small savings have forced investors to look out for alternative investments and many first time investors some started investing in equities through SIPs,” says Amol Joshi, Founder, Plan Rupee Investments.

Some distributors believe that though it is incorrect to see past returns while investing, many investors tend to do so. Over the last year, past returns for equity funds for periods of 3/5 years, were in excess of 15%. These high returns attracted many investors who registered SIPs.

Investor maturity towards equity as an asset class believe financial planners. Earlier when markets turned volatile, investors would just get scared and would shut their SIP investments. This time around despite a steep 12% drop in the Nifty in the first couple of months of the calendar year, distributors say they did not see many incidences of investors getting scared and closing their SIPs.

“The industry has taken several efforts in educating investors over the past few years, all of which have started yielding results now,” says A Balasubramanian, Chief Executive Officer, Birla Sunlife Mutual Fund. The industry has conducted investor education programs in far flung 2 tier and 3 tier towns, which were attended by several investors.

Financial planners have also been educating investors about the advantages of opting for goal based financial planning using SIPs, which has helped investors stay on longer. “Investors seem to be aligning their SIP investments with their long term goals,” adds Nimesh Shah. Today many investors are using SIPs to meet their long term goals such as child education / marriage, buying a house or planning for their retirement.

Technology has also played a large role in enabling higher number of SIPs. SIPs are now registered using NACH (National Automated clearing House) instead of the earlier ECS (Electronic Clearing Services).

“NACH will bring down the SIP registration time from the earlier 30 days to 20 days now,” says NK Prasad, president and chief executive officer CAMS, the leading registrar and transfer agency. CAMS has set up systems in place which are ready for a 100% growth in SIP registrations.