Dependency on SIP for wealth creation

Mutual Fund investment has evolved as one of the most favoured instrument among Indian investors. Systematic Investment Plan (SIP) has played a crucial role in making mutual funds popular.  SIP is a method of investing a fixed sum on a regular basis, normally on a monthly basis, in a mutual fund scheme. Investment through SIPs can be made at even shorter periods. Key features of SIPS like disciplined approach to investment and flexibility in fixing amount of investment have simplified the process of investment for common man. This has led to an unprecedented growth in mutual fund business. 

What numbers speak about power of SIP and wealth creation? 

To have a comparative assessment we have considered financial years for comparison.  

Continuous increase in the number of new accounts

•    Number of new investor accounts added by mutual fund industry  in FY 2017-18  – 1.6 Crore 
•    Number of new accounts added in FY 2016-17                                                        – 67 lakh
•    Number of new accounts added in FY 2015-16                                                        – 59 lakh
•    Total number of investor accounts at the end of FY 2017-18                                     – 7 crore 

Continuous increase in number of accounts and regular investment through SIP is clear testimony of confidence of retail investors in Indian equity market and mutual funds.  According to industry reports, smaller towns are leading in addition of new accounts. It shows gradual penetration of equity investment culture to second tier cities and towns. 

Continuous increase in the total AUM (Assets under Management)

Total AUM (Assets under Management) at the end of FY 2018 – Rs. 23.05 lakh crore
Total AUM (Assets under Management) at the end of FY 2017 – Rs 18.30 lakh crore
Increase in percent terms in Total AUM in one year                   – 26%

Infusion towards mutual fund schemes              – Rs. 2.72 lakh crore
Of this, infusion towards equity and ELSS         – Rs. 1.70 lakh crore

The above figure indicates the confidence of public in equity as an investment. Further, ELSS is proving to be an effective tax saver. Tax payers have started realizing the power of ELSS in providing better returns.

SIP propels AUM of mutual funds to new heights

New SIP registrations during FY 2017-18                                    – 1.15 Crore
Growth in number of SIP registration over previous year             – 92%
Total number of SIP accounts                                                       – 2.16 Crore
One month collection towards mutual funds through SIP            – Rs. 6,690 Crore (April 2018)

Factors contributing to the increase in mutual fund investment

•    Increased rural participation
•    Tax payers identify the potential of mutual funds to return inflation beating return over long period
•    Banks, financial intermediaries and online platforms re active in the distribution of mutual fund schemes
•    Continuous efforts by mutual fund industry to create awareness on  mutual fund products are yielding results
•    Simplicity and flexibility for investment through SIP   7 Reasons That Make Mutual Fund a Good Investment Option