Investment in mutual funds through systematic investment plans (SIPs) dropped for the fifth consecutive month to Rs 7,791 crore in August, amid challenging economic environment due to the COVID-19 pandemic.
Besides, equity mutual funds, which mainly depend on SIP for flows, saw a withdrawal of Rs 4,000 crore in August, much higher than Rs 2,480 crore witnessed in the previous month, data from the Association of Mutual Funds in India (Amfi) showed.
"SIP flows are reducing as well, it is clear that the retail investor is impacted due to the current economic environment brought on by COVID-19," said Jean-Christophe Gougeon, director (investment solutions), Sharekhan by BNP Paribas.
He added that in such a challenging economic environment, retail investors tend to reduce their SIP investments and reduce risk on their portfolios by selling equity mutual funds (MFs).
Gougeon, further, said the long-term opportunity mutual funds through both lump sum and SIP remain promising, the pain in the short term is not likely going to go away soon. As per the data, the industry raised Rs 7,791.6 crore through SIP route last month, lower than Rs 7,831 crore garnered in July.
Investment in August hit the lowest level since September 2018, when fund collection through the route stood at Rs 7,727 crore.
Further, fund collection through SIP dropped below the Rs 8,000-crore mark in June this year to Rs 7,917 crore. It was at Rs 8,123 crore in May, Rs 8,376 crore in April and Rs 8,641 crore in March.
Inflows through SIP have slowed down in the past five months but experts believe the route still continues to be the preferred one for retail investors to invest in mutual funds as it helps them reduce market timing risk.
G Pradeepkumar, chief executive officer of Union AMC, said that while the SIP amount has dropped nominally, once again, there is a net addition of about 3.43 lakh SIP folios, which indicate sustained interest of retail investors.
Currently, mutual funds have over 3.27 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes.
SIP is an investment plan offered by mutual funds, wherein one can invest a fixed amount in a mutual fund scheme periodically at fixed intervals, once a month, instead of making a lump sum investment.
It is similar to a recurring deposit where an investor deposits a fixed amount every month.