Most SIPs Into Mutual Funds Are Less Than Rs 5,000

The metaphor ‘tiny drops make an ocean’ best describes the inflows into mutual funds through the systematic investment plan route. A Franklin Templeton report, which quoted the Securities and Exchange Board of India annual report, said that 92% of SIP folios have a ticket size of up to Rs 5,000.

This is a significant data point, especially considering the fact that gross SIP flows into India mutual funds have grown exponentially over the past year and a half. This value has hit a fresh all-time high every month since July last year and stood at Rs 23,547 crore in August, according to data released by the Association of Mutual Funds in India.

The total number of SIP accounts has risen nearly 40% to 9.61 crore as of August this year. That’s because the number of SIP accounts added over the past year outstripped the discontinuations, though the latter remained elevated. As many as 36.54 lakh SIP accounts were closed in the year to August, up 87% from the previous year. At the same time, nearly 64 lakh new SIP accounts were created.

In fact, discontinued SIP accounts as a percentage of newly registered accounts rose to 57% in the year to August from 55% in the previous year.

Efforts to promote sachetisation of mutual fund investments seem to be bearing fruit, with SIP folios under Rs 500 seeing the fastest growth over the previous year. However, such SIPs still account for only 6% of the total folios.

The largest chunk of folios—as much as 73%—are SIPs between Rs 500 and Rs 3,000.

With the influx of new investors and the rapid increase in small-ticket SIPs, the average ticket size of such investments has fallen from Rs 3,159 in December 2018 to Rs 2,449 in August this year. 

Finally, the share of SIPs in the assets under management in equity mutual fund schemes continued to rise, indicating that more retail investors are taking a systematic approach to deploying their funds. In August, SIPs accounted for 27.4% of equity AUM, up from 26.9% a year ago, according to the Franklin Templeton report.