Industry can aspire to reach $5 a person monthly SIP in five years: Bhatia

With this, monthly SIP inflows can reach Rs 50,000 cr, says Sebi whole-time member

The rising trend of retail systematic investment plans (SIPs) in mutual funds (MFs) has presented an opportunity to increase monthly investment of $1.2 per person to $5 in the next five years, said Ashwani Bhatia, whole-time member of Securities and Exchange Board of India (Sebi).

Addressing the Business Standard BFSI Insight Summit, Bhatia said with a $5 per person monthly SIP, the industry can aspire to grow from the current monthly inflows of Rs 13,000 crore to Rs 50,000 crore in five years.

“Five years back when the asset under management (AUM) was at Rs 20 trillion, the AUM deposit ratio was 18. Today we are touching 23. The AUM-to-GDP ratio, which was 12, has now touched 16, while the global average is 60. So you can imagine the potential of the MF industry,” said Bhatia.

He added that retail investments had brought stability in the market while highlighting that the regulator wants more participation in government securities (G-Secs) also.

Sebi has issued circulars on reducing the time taken for unit redemptions and dividend payouts in MFs, along with the regulations to prevent insider trading.

In his address, Bhatia, the former chief of SBI Mutual Fund, said the portfolio management service (PMS) could grow like the MF industry in the coming days. Recently, the regulator introduced performance benchmarking for portfolio managers akin to what is being followed in the MF industry.

The MF industry crossed the Rs 40-trillion mark for the first time in November. 

However, even with rising participation from retail, the amount raised through equities during 2022-23 till now has been low with a fall of over 64 per cent in the amount raised through IPOs and FPOs compared to FY22.

Briefing on the reforms taken by the capital markets regulator, the former banker said Sebi had permitted alternative investment funds (AIFs) to participate in credit default swaps not only as protection buyers but also as protection sellers. The move will help deepen the domestic corporate bond market.

“There is a need for fund mobilisation from the corporate bond market as it provides an alternative source to finance and supplements the banking system to meet requirements for long-term investments. In my mind, it also reduces risk in the banking system,” said Bhatia.

He said Sebi recently formed a working group to look into matters of credit default swaps, including indications for mutual funds, too.

In its latest board meet on December 20, Sebi approved phasing out of share buybacks through stock exchanges gradually by the end of financial year 2024-25 and shift it to the tender route.

Bhatia said the move would provide a level playing field for shareholders and promote ease of doing business.

“We want long-term investors to celebrate the India story. We also understand it is difficult to be ahead of the market as far as regulations are concerned, but with data and through consultation process we will make changes to ensure that the securities market will run smoothly and meets all challenges,” said Bhatia while counting the steps taken by Sebi in regulating stock brokers and the market infrastructure institutions.

Bhatia, who took charge as a Sebi whole-time director in June, handles the departments for debt and hybrid securities, such as REITs and InvITs, AIFs, and foreign portfolio investors. During his address, he focused on the steps being taken to develop the REITs and InvITs market expecting large participation from retail investors.

“The government has proposed amendments to various laws to recognise the ability of REITs and InvITs,” he said.

Sebi will also specify the basic rules and terms related to green debt securities to address risks related to greenwashing. The capital markets regulator has also reached out to municipal corporations for promoting the bond mechanism.