Coronavirus impact: Retail investors stick to SIPs despite market crash
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Coronavirus impact: Retail investors stick to SIPs despite market crash

The SIP contribution numbers in April will hold greater significance as it will tell us whether the March numbers are only a result of lead time taken in processing 'stop SIP' requests or investors are really there for a long haul

  • April 10, 2020  
  • |  
  • UPDATED   15:31 IST
Coronavirus impact: Retail investors stick to SIPs despite market crash
Instead of exiting their investment in equity funds, retail investors have not only held on, but added more AUMs and Folios, through SIPs recording highest ever equity inflows at Rs 11,722.74 crore

The financial year which started with falling SIPs and unprecedented volatility ended with retail investors' rising contributions as the mutual fund industry amassed highest every monthly contribution of Rs 8,641 crore in March 2020. In a roller coaster ride for equity investors, the industry closed the financial year with a SIP contribution growth of 8%.

The financial year witnessed not just the general election in India, but also biggest ever liquidity crisis in shadow banking. There was also high level of corporate default on debt obligations and the last minute coronavirus outbreak which wiped out 30% of market wealth within a matter of weeks. The month of March was the biggest ever test of investors' faith in equity and the response has been quite encouraging so far.

"Unprecedented situations warrant equally unprecedented response, to help make the most of the crisis opportunity. This precisely sums up the retail investor riposte. Instead of exiting their investment in equity funds, retail investors have not only held on, but added more AUMs and Folios, through SIPs recording highest ever equity inflows at Rs 11,722.74 crore, highest ever equity monthly mobilisation at Rs 30,109.19 crores and record high annual SIP mobilisation of Rs 1,00,084 crores during the last fiscal" says N S Venkatesh, Chief Executive, AMFI.

This maturity in investor behaviour is a result of learning from the past, particularly the big scale market crash of 2009. Equities have recovered within 2-3 years in the past and investors are expecting the same. Recent investments have suffered the most while a big chunk of SIP investors with more than 5 years old investment are still sitting with some gains.

However, this data cannot be taken as a complete reaffirmation of investors' behaviour yet. First half of March 2020 witnessed highest volatility. There's a possibility of investors going for redemptions in second half of the month. As it typically takes around 7 working days for any standing instruction to change, we will have to wait before reaching a conclusion. The SIP contribution numbers in April will hold greater significance as it will tell us whether the March numbers are only a result of lead time taken in processing 'stop SIP' requests or investors are really there for a long haul.

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