Retail investors in India are a major contributor to the Indian market’s outperformance on a worldwide scale. Domestic investors have maintained a steady money flow in the equity market by investing directly and indirectly via mutual funds.
A consistent influx of assets into equity mutual fund schemes allows fund managers to continue making investment bets regardless of market circumstances. They always keep some dry powder on hand to seize on new chances. This dry powder is supplied by consistent and rising inflows through systematic investment programmes (SIP).
The Association of Mutual Funds in India (AMFI) has revealed statistics that demonstrate SIP’s growing percentage of total mutual fund assets under management (AUM). In March 2023, SIP will account for 17.3 percent of total AUM, the highest amount ever. It was 200 basis points greater than the previous year.
SIP has expanded by 26 percent over the previous five years, while total MF investments have climbed by 11 percent. FY23 was a banner year for SIPs, with investments totaling Rs 1.6 lakh crore. In March 2023, the monthly SIP run rate reached a new high of Rs 14,279 crore.
What’s notable is that the flows have come in despite claims that 97 percent of funds underperformed the index during a three-year period (CY 2020, ’21, and ’22). Passive funds are receiving a big portion of new investment.
Investors are placing their bets on low-cost passive investment vehicles that provide better returns. At the same time, they are spreading their investments out to take advantage of rupee cost averaging. Almost half of all SIP inflows have a holding term of more than three years.
According to the data, investors have outwitted active fund managers at their own game.