Eight of 10 net SIP investments go into active equity schemes: Amfi data

Debt schemes account for 2% of the net inflows, passive schemes 8%

Hybrid and passive funds gained a lot of traction in the past two years owing to their advantages vis-a-vis active equity schemes, but are yet to emerge as competition to active equity funds when it comes to systematic investing. 

An analysis of systematic investment plan (SIP) data shows that over 80 per cent of the net SIP inflows went to active equity schemes in September compared to only 6 per cent in passive schemes and 8 per cent in hybrid.

Debt schemes accounted for only 2 per cent of the net SIP inflows in September.

Investment advisors recommend the SIP route for investment in volatile asset classes to maximise the benefit of rupee cost averaging. This is why equity schemes are the most preferred option for SIP investment. Investors generally use debt and hybrid schemes to park lump sum amounts during periods of equity market downturn.

There has been a lot of noise around passive and hybrid schemes for the last couple of years owing to multiple factors. While hybrid schemes were pitched as a safer option to equity schemes when markets had scaled to record highs, passive schemes are being pushed as an alternative to 'underperforming' active largecap funds.

The assets under management (AUM) of passive schemes has jumped 88 per cent between March 2021 and September 2022. Hybrid funds have posted a 44 per cent growth during the same period.

Gross vs net

Data from Association of Mutual Funds in India (Amfi) shows that gross SIP inflows in active equity schemes as well as other schemes (debt, hybrid and passive) have surged this financial year. The gross inflows in equity schemes has risen 6 per cent in FY 2023 so far to Rs 10,956 crore in September from Rs 10,365 in March.

The rise in gross SIP inflows is only 3 per cent for the rest of the open-ended schemes.

However, net inflows haven't gone up in tandem with the gross flows. Net inflows in active equity schemes, which came in at Rs 5,672 crore in April, rose to Rs 7,360 crore in June and has since declined every month to Rs 5,325 crore in September.

According to MF executives and top distributors, lower net SIP inflows is a result of higher redemptions on account of upcoming festivities. Investors often wait for the festive season to make big ticket purchases like a house, car or jewellery.

Amfi data shows that investors pulled out Rs 6,578 crore from their SIP accounts in September, which is the highest in the last 11 months. Redemptions had surged in September 2021 too as investors took out Rs 8,600 crore.