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SIP inflows extend all-time highs for 3rd month in row, but there's a catch

SIP inflows for the year 2022 stood at a record of  ₹1,49,437 crore up by 31% from the previous year.  (iStock)Premium
SIP inflows for the year 2022 stood at a record of 1,49,437 crore up by 31% from the previous year. (iStock)

  • In December, the inflows in SIPs stood at a fresh all-time high of 13,573 crore. This is higher compared to inflows of 13,306 crore in November and 13,041 crore in October. Inflows in SIPs have stayed above 13,000 crore mark for the third time in a row now.

The appetite for mutual funds via Systematic Investment Plan (SIP) has continued to gain traction so far in FY23. The inflows in SIPs extended their all-time high levels for the third month in a row in December. This would be the 16th month that SIPs inflow is above 10,000 crore. The year 2022 has now recorded an inflow of 1,49,437 crore in SIPs. This shows that investors are becoming aware of the benefits SIP can bring to their investments ahead. However, the data also suggests that cancellations of SIPs have also reached to 25-month high which is concerning.

In December, the inflows in SIPs stood at a fresh all-time high of 13,573 crore. This is higher compared to inflows of 13,306 crore in November and 13,041 crore in October. Inflows in SIPs have stayed above 13,000 crore mark for the third time in a row now.

SIPs held above 12,000 crore inflow levels between May to September before rising to the 13,000 level in October. Notably, SIPs have been above 10,000 mark since August 2021.

SIP inflows for the year 2022 stood at a record of 1,49,437 crore up by 31% from the previous year --- translating to a monthly average of 12,453 crore, as per Geojit Financial Services. 

As per Gopal Kavalireddi, Head of Research at FYERS, during the calendar year 2022, SIP inflows averaged more than Rs12,500 crore per month, helping investors to stay in the stock market and benefit from Rupee cost averaging.

In the nine months of FY23, inflows in SIPs are around 1,14,154 crore --- which is a mere 10,412 crore away from the inflows of 1,24,566 crore recorded in the entire fiscal FY22. Inflows in SIPs were at 96,080 crore in FY21.

Akhil Chaturvedi, Chief Business Officer, Motilal Oswal Asset Management Company said, "SIPs continue to create new milestones with above 13k crores of inflows for the 3rd straight month. This highlights the strong domestic flows which have also helped to negate the recent selling by FIIs."

According to Sriram B.K.R., Senior Investment Strategist at Geojit Financial Services, it is impressive to see steady SIP inflows and it shows that investors are increasingly becoming aware of the benefits SIP can bring to their investments over time, especially when markets are volatile.

Geojit's strategist added, "year just went by was, in a way, witness to this. Markets (refer Sensex) saw at least 3 or 4 intermittent corrections beyond -7% during the year 2022, still SIP inflows gradually improved by 2000 crore through 2022."

Also, Manish Mehta, Head - of Sales, Marketing, and Digital Business, Kotak Mahindra Asset Management Company said, given the market volatility, investors continue to show maturity in their investment behaviour by continuing their SIP investment. When markets are high, the industry sees SIP less redemptions and at lower market levels, it is SIPs plus additional purchases.

However, Geojit's strategist also pointed out that SIP accounts are likely to be around 6.12 crore as of December 2022 --- which is an addition of 1.22 crore accounts YoY --- but this is lesser than what was added in the year 2021 where the net addition was about 1.44 crore accounts.

Sriram said, "New SIPs added in Dec’22 is expected to be around 23 lakhs, but the net addition seems around 7.85 lakhs (month on month), suggesting SIP cancellation ratio at 66%, a 25-month high. This is a reason for concern in the SIP trends that we are seeing. Though there were instances of lower net additions seen in some months even in the past, the overall trend seems to be getting stable."

Going ahead, Sriram said, "challenges would be on, above average redemptions induced either by profit booking or heightened volatility and cancellation of SIPs."

He added, "Market falls or fluctuations for months in a row can be perplexing at times, but what we have seen in equities is that it rewards those with discipline and patience handsomely in the long term."

To investors, Sriram suggests that they should continue their SIPs through the market volatility in order to reap the fullest gains of this whole systematic approach of investing in equities.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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