• AUM
  • AMFI
  • GDP
August 28, 2019

SIP-shape

Retail investors catalysing growth of mutual funds in India

Little SIPs help rake in big bucks

 

SIPs, a term typically associated small or retail investors, has emerged as a big wave in the Indian mutual fund industry.

 

Between April 2016 – when AMFI started disclosing monthly SIP contributions – and June 2019, the route has helped rake in a whopping ~ Rs 2.3 trillion. That is nearly 19% of the increase of ~Rs 11.9 trillion in AUM of the industry.

 

What’s more, SIPs in equity-oriented mutual funds surged despite frequent bouts of market turbulence between April 2016 and June 2019, indicating the route helps investors sidestep the behavioural weakness that emerges during volatile market phases.

 

SIPs are an ideal route for individual investors to enter equity funds, avoiding worries of timing the market, averaging cost, and investing in a disciplined manner. These investors should, however, note that the effectiveness of SIPs optimises over the long run, helping reduce risks from volatility in the underlying market and shoring up returns.

 

Regulator and industry come together to tide over crisis

 

On the debt side, the industry and regulator have come together over the past year to tide over the crisis that followed the credit events. Measures such as side-pocketing, move towards full mark-to-market of debt securities and reduction of threshold caps for vulnerable pockets are a welcome change and aimed at adopting best practices

 

Fintech transforming asset management

 

Meanwhile, financial technology has emerged as a harbinger of growth for asset management companies, both in terms of customer acquisition and at the backend. The front-end needs sharper focus, though. Also, the benefits of technology notwithstanding, there are overlapping risks such as consumer protection, data protection, lack of infrastructure and access, which need to be managed by the industry, especially in a developing country such as India.