SIPs do the trick for funds

Systematic investment plans (SIP), through which mutual fund investors put a fixed sum into MF schemes, are proving to be engines of growth for fund houses with the number of SIP investors growing nearly three times since last year.

While the fund houses are betting high on SIP inflows, the retail response to their equity schemes has been fluctuating as retail participation to new equity schemes depends on the stock market sentiment at that point of time. Some of the MFs have even brought down the the minimum investment under SIP to Rs 100 and Rs 50 for their special schemes, from the earlier lowest size of Rs 500.

"The number of SIP investors is growing. This is also beneficial for mutual fund houses. Presently, the industry has nearly 12.5-13 lakh SIP investors, which has tripled from 4.5 lakh an year ago," said Milind Barve, managing director, HDFC Mutual Fund.

The equity scheme-focused fund house has been adding SIP investors to its fold for a long time. Currently, it has 3.75 lakh SIP investors.

"The SIP is especially helpful for big fund houses who have to maintain their position in the monthly Assets Under Management (AUM) race. Normally, the inflows into equity schemes dip at the end of the fiscal or sometimes investors defer their equity investments due to weak market conditions. A bigger number of SIP investors means the fund house's inflows remain constant," said Subhash Bagaria of Angel Broking.

After bringing down the SIP levels, the funds are also asking distributors to focus on getting more SIP investors for the New Fund Offers (NFOs). Recently three MFs, Reliance, ICICI Prudential and Lotus brought down the minimum size of investments for SIP.

"Given the current levels of volatility in the markets, we believe that entering the equity markets through a SIP will yield adequate returns while minimizing the risks related to investing in equity. We have endeavoured to make this investment option accessible and affordable to a wider range of investors who wish to participate in the equity markets but have restraints on liquidity," Ajay Bagga, Lotus MF said.

Industry sources, however, indicated that the MFs were bringing down the SIP levels in an attempt to bring in the middle and lower middle classes, who have traditionally put their money in savings, into their fold.

Following UTI's and ICICI Prudential's moves to develop micro SIP options for rural areas, other fund houses could also launch similar schemes in the future.

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THE NEW MANTRA

SOME OF the MFs have even brought down the the minimum investment under SIP to Rs 100 and Rs 50 for their special schemes from the earlier lowest size of Rs 500

THE SIP is especially helpful for big fund houses, which have to maintain their positions in the monthly Assets Under Management race