SIP collections drops 4% to `96,000 cr in FY21

New Delhi: The Mutual fund industry saw its collections through SIPs dropping 4 per cent to Rs 96,000 crore in the 2020-21 fiscal, as Covid-19 induced lockdowns led to income uncertainty.

Going forward, success of the vaccination drive, better than expected economic scenario and higher incomes can be the factors that will have an impact on systematic investment plan or SIP flows, Gopal Kavalireddi, Head of research, FYERS, said.

While a few of the economic indicators like GST collections, auto and housing sales look positive, IIP and inflation data along with intermittent lockdowns can affect the economic progress in the ongoing fiscal, he added. A total of Rs 96,080 crore was collected through SIP in just concluded fiscal, lower than Rs 1,00,084 crore garnered in 2019-20, as per the Association of Mutual Funds in India (AMFI).

Inflows into SIPs have averaged about Rs 8,000 crore for the 12 months till March this year. Systematic investment plans or SIPs have been the the preferred route for retail investors to invest in mutual funds as it helps them reduce market timing risk. The mutual fund SIP contribution has increased steadily over the years. From Rs 43,921 crore collected in 2016-17, Rs 67,190 crore in 2017-18, Rs 92,693 crore in 2018-19, the SIP contribution hit the Rs 1 lakh crore mark in 2019-20.

Quantum Mutual Fund Chief Executive Jimmy Patel attributed the decline in SIP numbers to coronavirus-induced lockdown as several investors chose to stop their SIPs. "With the coronavirus pandemic resulting in lockdowns in March 2020 and raising income uncertainty, many investors opted to pause their SIPs. This was evident from the decrease in SIP inflows post March 2020. From a high of Rs 8,641 crore the contribution decreased for 11 consecutive months, before it could breach the previous highs," FYERS' Kavalireddi said.

The March 2021 SIP contribution of Rs 9,182 crore is robust. Of this, close to Rs 500 crore would be a spillover from February (shorter month and end of the month holidays), he added. Gautam Kalia, Head – Investment Solutions, Sharekhan by BNP Paribas, said that market correction in March-April of 2020 in tandem with the pan-India lockdown was a novel experience and many retail investors reacted by stopping their SIPs and electing instead to wait and watch.

In addition, the lockdown also impaired the physical distribution efforts across the industry and finally, the market rally in October-November 2020 led a lot of investors to book profits and the historic high levels deterred new investors, he said.