July 2022 SIP flows prove that investors are really persisting

  • India Infoline News Service
  • 09 Aug , 2022
  • 7:51 AM
It may be recollected that in FY22, SIP flows had touched record levels of Rs124,566 crore and going by the early estimates for the first 4 months up to July, FY23 promises to be bigger and stronger in terms of SIP flows.  Here is how.

Data Source: AMFI

As can be seen in the above chart, April 2022 saw a modest tapering of SIP flows to Rs11,863 crore but bounced back to Rs12,286 crore in the month of May 2022. It has been stable since. For June 2022, SIP flows were stable at Rs12,276 crore and at Rs12,140 crore in July 2022. Before the maze, a quick detour on why investors gravitate to SIPs!

A quick detour: Why are investors gravitating towards SIPs?

Before going into the nuances of SIP flows in July 2022, here is a quick detour to understand why Indian investors are gravitating towards SIPs or systematic investment plans.

a)      In a sense, the experience of 2020 has been a great teacher. Many investors tried to time the market and exited their SIPs around the pandemic. However, it was the investors who persisted with their SIPs, who were laughing all the way to the bank.

b)      There is an automatic fit between the income flows and SIP outflows. Nothing can be more disciplined than setting aside a small sum each month for your long term goals. Apart from the discipline, it is easy to understand and elegant to execute.

c)      It saves investors the hassles of timing the market. Most investors are wiser and realize that timing the market is a zero-sum game. A few bad days and all your efforts come to nought. The best way out is to adopt an agnostic approach to investing like SIPs.

d)      Lastly, the power of SIPs can be tested and verified with real data. If you run a SIP through 2 or 3 cycles, you invariably end up better off in a SIP. Timing the market has just given people the ulcers without any performance to show.

It is a combination of factors that has driven SIPs, but it must be said that the post pandemic period was a natural energizer to the concept of SIPs. Now, back to SIP data.

Reading through the SIP story of July 2022

FY23 may have just completed just 4 months, but we now have data for 6 years in terms of monthly and annual SIP flows. If you look at the underlying secular trend, it has been consistently growing, except for the brief lull in FY21, due to the pandemic. In the chart below, FY23 data is annualized, so not strictly comparable. However, with each passing month, the FY23 data is increasingly reflective of the full-year trend. One thing we noticed in FY22 was that the full year trend is captured quite effectively by the end of Q1.

Data Source: AMFI (FY23 data is annualized)

Since absolute numbers are misleading, the average monthly SIP ticket (AMST) can be an answer. This has been on a steady uptrend over last 6 years. AMST was Rs3,660 crore in FY17, Rs5,600 crore in FY18, Rs7,725 crore in FY19, Rs8,340 crore in FY20, Rs.8,007 crore in FY21 and Rs10,381 crore in FY22. In FY23, AMST as of July 2022 stands at Rs12,141 crore.

What are the key takeaways? Firstly, SIP flows have been robust and with NFOs reopening in July, we should wait for the double effect. Secondly, SIP flows have remained stable despite global and domestic headwinds like recession fears, China slowdown, inflation, OPM stress, and valuation concerns. Investors have learnt that in SIPs; only persistence pays.

SIP folio, SIP AUM and the spread story for July 2022

SIP flows in rupee terms can be enticing and simple, but at times misleading too. SIP flows do not capture the retail intensity of SIP flows or the retail distribution. That is captured by SIP folios and SIP AUM. Both, SIP folios and SIP AUM can be used as proxies for assessing retail spread, although SIP folios (MF accounts unique to an AMC) are more reliable.

How did the SIP folio growth story pan out in July 2022? The number of SIP folios increased from 554.89 lakhs in June 2022 to 561.94 lakhs in July 2022. That is monthly net accretion of 7.05 lakh SIP folios or 1.27%. The momentum of SIP folio accretion has been falling, but that can be attributed to uncertain market conditions and lethargy at higher levels. Even if you factor in multiple folios and non-equity folios, the folios growth still reflects a good picture of retail intensity. It may not be precise; but a fair median nevertheless!

What about SIP AUMs? The SIP AUM (assets under management) increased sharply from Rs551,189 crore in June 2022 to Rs609,296 crore in July 2022. This spike of 10.54% in SIP AUM in July 2022 can be almost entirely attributed to the sharp spike in equity indices. However, the retail SIP folio accretion in July has been better than June, so there is retail intensity that is still being built. In short, retail appetite for equity funds is robust. As of July 2022, SIP AUM accounted for one-third of overall retail Mutual Fund AUM.

SIP stoppage ratio spikes in FY23

SIP stoppage ratio is the ratio of SIP accounts discontinued in a specified period to the new SIP accounts opened. Lower this ratio, the better it is as it indicates higher retention of SIP investors. After all, you don’t want your SIP investors exiting and going away. You really want to retain them. Some of the longer term trends are interesting. For FY20, the SIP stoppage ratio for the full year was 57.84% while for FY21 it was 60.88%.

The high SIP stoppage ratios in FY20 and FY21 can be attributed primarily to the COVID induced uncertainty. Cash flow emergencies also forced investors to redeem mutual funds. However, in FY22, the SIP stoppage ratio gravitated sharply lower to 41.74%. That is within the acceptable SIP stoppage ratio range of 40% to 45%. However, the first 4 months of FY23 have shown a sharp deterioration in SIP stoppage ratio.

Between April 2022 and July 2022, the SIP stoppage ratio stands at 55.53%. In June 2022, the SIP stoppage ratio had touched a high of 63.86%; almost back to the pandemic levels. In comparison, the SIP stoppage ratio has tapered to 59.53% in July 2022. However, for the first four months overall, the SIP stoppage ratio is above comfort zone at 55.53%.

The millions dollar question is where is the next big thrust to the SIP story going to come from? The last big surge in SIP accounts came from the millennials entering the equity and mutual fund market. That trend may still be around, but the momentum could be waning. Remember, there are 26 crore life insurance holders, 60 crore bank account holders and 90 crore mobile phone owners. That would be the next step in the pyramid to tap for SIPs.
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Passive funds save the day for MF flows in July 2022

  • India Infoline News Service
  • 09 Aug , 2022
  • 10:11 AM
For the month of July 2022, inflows into equity funds and debt funds stayed positive. However, the strength of flows into active funds were relatively tepid. That was more than compensated by the strong inflows into passive funds during the month. However, selling pressure was visible in hybrid funds, especially arbitrage funds.

However, there were 2 stories to savour in the month of July. Firstly, despite the volatility, SIP flows in July 2022, was almost stable at Rs12,140 crore. The second good news was that NFOs reopened after a 2 month hiatus. However, as of end July 2022, a number of NFOs are still open so a clearer picture of NFO flows should emerge when we get the August data.

The overall MF AUM in July 2022 bounced sharply to Rs37.75 trillion. This was on the back of a sharp bounced in the markets and a rally across the board. The Nifty and the Sensex have bounced more than 12% from the recent lows and that has driven a lot of value in equity fund AUMs. However, overall AUM is still short of the peak.

Data Source: AMFI

Overall MF net inflows for July 2022 stood at Rs23,605 crore. This was driven by open ended debt fund inflows of Rs4,930 crore, open ended equity fund inflows of Rs8,898 crore and passive fund inflows of Rs14,271 crore. However, hybrid funds saw outflows of Rs(5,146) crore. Closed ended funds saw net inflows of Rs599 crore in July 2022, largely on the strength of Fixed Term Plan NFOs. The current AUM mix is; Income Funds (33.02%), equity funds (37.50%), hybrid funds (12.86%) and passive & solution funds (15.95%). The residual 0.67% was accounted for by close-ended funds.

It may be recollected that in March 2022, the AUM of active equity funds had decisively crossed that of debt funds. That lead has been sustained since and in the month of July, that lead has sharpened due to the sharp rally in the market. Debt funds have been facing pressure due to redemptions as well as due to the price impact of rising bond yields. Overall MF AUM grew just 5.18% yoy from Rs35.89 trillion in July 2021 to Rs37.75 trillion in July 2022. Hybrids, solution funds and passive funds account for 28.81% of the total AUM.

Debt fund flows cautious in July 2022 amidst rising yields

In the last 5 months, debt funds saw sharp outflows in March, May and June. April was the sole exception and now there are marginal net inflows into debt funds in July 2022. The outflows in the recent past could be attributed to treasury pressures from corporate funds and fear of rising yields. Debt funds inflows were fairly subdued with most of the inflows coming into Overnight funds. Overall open-ended debt fund inflows were Rs4,930 crore in July 2022. The selling was prominent across low duration, long duration and even floater funds in the month of July 2022.

Here we first look at the debt fund inflows in July 2022. The funds that saw substantive positive inflows include Overnight funds Rs19,919 crore, Ultra Short Duration Funds Rs3,728 crore and Money Market Funds Rs2,639 crore. The net inflows clearly betray a sense of bond buyers playing it safe by staying at the short end of the yield curve to avoid price risk.

We now turn to the category of debt funds that saw outflows in July 2022. Big selling was visible in Liquid funds Rs7,693 crore, Floater Funds Rs4,682 crore, Banking and PSU funds Rs2,810 crore, Corporate Bond Funds Rs2,582 crore, short duration funds Rs1,872 crore and low duration funds Rs646 crore. Surprisingly, even floater funds are seeing selling, despite the bond yields moving up closer to 7.4% on the 10-year benchmark.

NFOs return, but SIPs boost equity fund flows in July 2022

In the month of July 2022, the sharp rise in the indices and the FPI inflows gave a lot of confidence to mutual fund investors to buy into equity funds. However, the big story of the month was still the persistency of SIP flows, which stayed robust at Rs12,140 crore. The NFOs have just restarted in July 2022 and the impact should be visible in this quarter. Overall equity fund inflows at Rs8,898 crore may not be exciting but the big takeaway is that, once again, not a single category of equity fund saw net outflows in July 2022.

Let us turn to specific category-wise inflows. During July 2022, Multi-cap funds plus flexi-cap funds led the way with inflows of Rs1,906 crore. Small Cap funds collected Rs1,780 crore, mid cap funds got inflows of Rs1,245 crore, large & mid cap funds saw inflows of Rs1,120 crore and large cap funds attracted flows of Rs1,091 crore. Among others, focussed funds saw inflows of Rs773 crore, contra funds Rs427 crore and ELSS funds Rs328 crore. The order of preference appears to be shifting in favour of small and mid-cap funds for alpha gains.

One parameter that tells you the story of sustainability of equity fund flows is folio accretion. Folios are MF investor accounts and give a good idea of the retail spread of demand. As of the close of July 2022, equity folios touched an all-time high of 902.53 lakh folios out of total mutual fund folios of 1,355.74 lakhs; or 66.57% share of overall folios.

Same story; Hybrid funds see outflows, passive funds come out trumps

Hybrid funds saw outflows of Rs5,146 crore in July 2022. This is similar to the trend that we have seen in last few months. Two factors worked against hybrid funds in July 2022. Firstly, NFOs have just started but we are yet to see the popular BAF funds, as the focus is currently on passive funds NFOs. Secondly, arbitrage funds saw heavy outflows of Rs6,408 crore. Other hybrid categories like aggressive hybrids and BAFs saw net inflows in July 2022.

Passive funds were the big story of July 2022. These passive funds saw healthy inflows of Rs14,271 crore as investors looked for lower cost alpha. The passive surge was led by equity & debt index ETFs at Rs7,635 crore followed by index funds at Rs6,779 crore. Index ETFs got a boost from the NFO rush. Gold ETFs saw outflows in July while the international FOFs saw net inflows in the month. Most NFOs tend to gravitate towards passive funds since these funds do not have product level limits. For passive funds, NFOs could be the next big story.

Mutual fund flows have de-coupled from market gyrations

On an overall basis, mutual funds saw net inflows of Rs23,605 crore in July 2022, largely on account of strong inflows into passive funds followed by active equity funds. Despite the domestic and global uncertainty, SIP flows were stable at Rs12,140 crore in July 2022. So, would it be fair to say that mutual fund flows have de-coupled from market gyrations. A few swallows, do not make a summer; but Indian mutual funds may be gradually getting there.

Thirteen mutual funds trends in January 2023

  • 20 Feb , 2023
  • 9:35 AM
  • Each month, the AMFI releases reports on some of the key trends in mutual funds in terms of composition of the AUM, the composition of flows as well a macro picture of the mutual funds segment. Here are some key takeaways in terms of mutual fund trends in January 2023.

Thirteen Mutual Fund Trends visible in January 2023

Here is a collection of 13 interesting mutual fund trends visible in the mutual funds data released by AMFI for January 2023.

  1. Over the last one year, the total assets under management (AUM) of mutual funds grew from Rs38.89 trillion to Rs40.80 trillion. So, in terms of average assets, the AUM is up 4.9% on a yoy basis. The AUM growth in equity funds and passive funds has been largely offset by AUM outflows from active debt funds between January 2022 and January 2023.

  2. How has the scheme wise composition of assets under management changed in the last one year? Between January 2022 and January 2023, the AUM of active debt funds has fallen from 24.6% of overall AUM to just 19.3% of AUM. It has stabilized at that level over the last few months. Liquid fund AUM is up from 15.7% to 16.6% in last 1 year.

  3. Equity funds have seen an improvement in active share across the board. For instance, the equity oriented schemes have seen their market share go up from 48.6% to 51% between January 2022 and January 2023. During the same period, the AUM of ETFs and FOFs is up from 11.2% to 13.1%.

  4. In the last few years, we have seen the composition of MF AUM shifting away from institutions and towards individual investors. That trend got accentuated in 2022. Share of individual investors went up from 55% to 57.3% between January 2022 and January 2023. During the same period, the share of institutional clients in the AUM fell further from 45% to 42.7%.

  5. How have individual and institutional investors allocated money to various asset classes as of January 2023? In active debt schemes, 58% of AUM was from institutions and 42% from individual. In equity schemes, institutions were 11% while individuals were 89%. In contrast, institutions were 86% of the AUM of liquid funds while individuals were 14%, which is not too surprising as that is more of a treasury product. What is perhaps disappointing is that individuals account for just about 10% of ETF/FOF AUM while institutions account for 90%. Clearly, individuals are not making the best of passive idea.

  6. Let us look at this data differently. How does the composition of individual investors and institutional investors look like? Individuals have nearly 80% of their MF AUM in equity oriented funds, 14% in ETFs, 4% in liquid funds and just 2% in debt funds. Institutions have 33% of their allocation in liquid funds, 28% in ETFs/FOFs, 26% in debt funds and just about 13% in equity oriented funds.

  7. Who contributed more to the AUM growth between January 2022 and January 2023? Was it individuals or institutions. Overall AUM in this period was up from Rs38.89 trillion to Rs40.80 trillion. This was largely driven by individual investor AUM growing from Rs21.40 trillion to Rs23.39 trillion (a growth of 9.3%). This can be attributed to a mix of NFOs, SIP flows and new MF folios being added. In contrast, the AUM of institutional investors fell from Rs17.49 trillion to Rs17.42 trillion between January 2022 and January 2023.

  8. How does the mix of AUM look when classified into T-30 and B-30 cities. (T-30 represents the top 30 cities while the next rung is represented by B-30). As of January 2023, just about 17% of the AUM came from B-30 cities with 83% of the AUM still coming from the T-30 cities. But, how are the asset mix composed of in B-30 cities and in the T-30 cities?

  9. Let us first talk about the B-30 cities as of January 2023. If you look at the B-30 AUM, 79% of the AUM was in equity oriented schemes while only the balance 21% were in non-equity schemes. If you go to the T-30 cities, 45% of AUM was in equity schemes and 55% was in non-equity schemes. This could be attributed to the fact that most of the large corporates and institutions are located in the T-30 cities, or at least the treasuries are managed out these T-30 cities.

  10. The Direct Plan was permitted since 2013 to ensure that those who want to invest directly can avoid paying the marketing commissions on the fund. This tends to enhance returns. Nearly 45% of the overall mutual fund flows came in through the Direct Route. However, this can be misleading because this segment is dominated by the corporates and institutions. In the case of individuals, only 20% of retail investors and 25% of the HNIs invested through the Direct route. However, the percentage is as high as 90% for institutional investors and 77% for corporates. They have consistently adopted the direct route rather than the regular route and have been saving on commissions.

  11. How have the folios (investor accounts unique to an AMC) grown over time in India. Folios are a much better reflection of the retail spread of mutual fund investments. In September 2014, the total number of mutual fund folios were at a low of 3.95 crore. Between September 2014 and January 2023, the total number of folios have grown 3.6 times to 14.28 crore folios. Post the COVID pandemic in March 2020, there has been a sharp surge in the number of mutual fund folios from 8.97 crore to 14.28 crore.

  12. How is the mix of these folios made up of? Out of the 14.28 crore folios in mutual funds as of December 2023, retail individuals accounted for 91.1% of the folios, high net worth investors (HNIs) accounted for 8.2% of the folios while institutions accounted for just about 0.7% of the overall folios of mutual funds. Out of the total folios, 67.5% are in equity oriented funds, 12.5% of the folios are in ETFs / FOFs, 8.5% folios in hybrid funds and the balance is distributed across debt funds, liquid funds, solution funds and closed ended funds.

  13. Finally, the data on mutual funds breaks a very popular myth that retail investors tend to take a very short term view of mutual funds. For instance, you would be surprised to know that 44.4% of the equity assets of mutual funds stayed invested for more than 2 years while 72% of the equity fund investments stayed invested for more than 1 year. It is still better if you look at retail investors. More than 57% of the equity assets were held by retail investors for at least 2 years while over 80% of equity fund investments by these retail investors for at least one year. That surely dispels the myth that retail investors take a very myopic view of equity fund investing.

So, what are the broad takeaways. Firstly, equity fund investors are still largely equity oriented but are not making the best of passive options. Secondly, equity fund investors are actually long term investors and are patient enough to hold on. The mutual fund landscape in India is changing, and it is changing for the better.


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  • 09 August, 2022 |
  • 10:37 AM

There were 2 stories to savor in the month of July. Firstly, despite the volatility, SIP flows in July 2022, were almost stable at Rs12,140 crore. The second good news was that NFOs reopened after a 2 month hiatus.

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