Investors skipped SIP instalments in bear phase

Investors skipped SIP instalments in bear phase

Courtesy - BL Research Bureau

Retail investors in mutual funds are not only guilty of ‘timing’ their lumpsum investments, they also try and time their systematic investment plans (SIP), according to an industry data.

The data reconfirms the general belief that the retail investors refrain from investing at lower market levels and re-enter equity funds only once they see a rally.

Inflows through SIP into 17 leading mutual funds were muted in the month of April, with the number of new accounts added at less than 1 lakh. As the equity indices started to move higher, the number of accounts swelled, surpassing the two lakh mark in July.

It is also noteworthy that investors seem to skip their monthly instalments during bearish market phases.

The number of ‘failed mandates’ for SIPs (where the ECS was not honoured or minimum balance in the account was inadequate on the date of investment) also peaked in April.

Failed SIPs in fact outnumbered the new accounts created by a margin of 45,000 accounts that month. But the situation has changed dramatically by July, with new accounts outstripping failed SIPs by more than 50,000 accounts.

Average SIP collection


Poor market sentiment also impacted the average ticket size for new accounts added. The national average was less than Rs 2100 during April but increased by Rs 50 in the July. Among the four metros, Delhi tops the national average by good margin while Chennai was lower than the national average.

But the number of accounts opened in Mumbai was far higher than Delhi.

In all, the cumulative number of accounts held by the 17 mutual funds mentioned here is about 18.5 lakh, and they managed SIP assets of Rs 14,000 crore.

Less than 15 per cent of the retail accounts with the mutual fund industry are currently through the SIP route. One certified financial planner opines that the poor return from SIPs running over the last couple of years could be one of the prime reasons for the low participation.