According to data from the Association of Mutual Funds in India (Amfi), the monthly SIP book grew about 2% between 16 April and 24 May. The SIP monthly book rose from 20,371 crore in April 2024 to 20,904 crore in May, marking an all-time high for monthly SIP inflows.
While it took over three decades for the SIP monthly book to reach 20,000 crore, the next 30,000 crore could be added in just 4-5 years. Assuming a month-on-month growth rate of around 2%, the milestone of 50,000 crore could be achieved by January 2028, and 1 trillion by December 2030.
In the past decade, India has witnessed significant rise in financial savings, with retail investors emerging as one of the strongest pillars of India’s growth trajectory. Besides broadening the investor base, they are also providing a strong foundation for the market. According to the Ministry of Statistics and Program Implementation (MoSPI) estimates, the household savings pool has declined drastically, with a corresponding increase in loans and investments, especially in mutual funds. This influx of savings into investments is catalyzed by easy, regular and low-ticket investment avenues such as SIPs.
SIP is an investment tool allowing people to invest a nominal amount—this is the USP of SIPs. It allows small investors with relatively low risk appetite to also enter the securities marketKolkata Investment. The average SIP ticket size has gone down from 2,500 in 2016 to 2,341 in April 2024, suggesting a more democratic participation, thereby allowing an broader investor base to invest in mutual funds using SIP. The lower the SIP ticket, the better its accessibility. Furthermore, since SIPs come with high liquidity, it takes away the fear factor that is usually associated with investments in securities in terms of capital erosion.
There is this growing understanding of the compounding effect of SIPs. Adding to this effect, is the expanding financial literacy, owing to which, investors do not get jittery over regular market fluctuations. More and more investors are becoming aware of what exactly risk and uncertainty implies, which is a great trend for the Indian investment landscape. Investing in mutual fund using SIPs also brings in the financial discipline allowing investors to manage their savings, investments and expenses with greater ease.
It is interesting to note that, despite the ongoing caution by market experts surrounding expensive stock valuations, number of investors availing SIPs outnumber those discontinuing them. In February, the SIP stoppage ratio fell to a 27 month-low, indicating higher retention. This is primarily because of the strong performance of mutual funds over the past couple of years.
The accessibility of direct mutual funds via SIPs through online platforms has extended beyond Tier-30 cities. The direct plans are garnering more investments from smaller towns and cities than the T-30s. In FY24, folios in B-30 increased by 52%. All these trends are indicative of the mega cycle of sustainable expansion of SIPs in India.
As market leaders, it is our responsibility to make investments avenues even more easy and accessible to every individual belonging to various economical strata across all tier cities. SIPs are inherently an investment tool that comes with a psychological reassurance as one can start investing with an amount as nominal as 500.Kanpur Stock
In absolute terms, this nominal amount can churn out to become the biggest investment avenue given the demographic strength of the country. Technological advancements, financial literacy and penetration of the same will play a major role in sustenance and further acceleration of this trend.
Dhiraj Relli is managing director and chief executive officer, HDFC Securities.
Surat Stock