Systematic investment plans become cushion against FPI selling – Times of India

MUMBAI: Remember March 2020. The pandemic has just begun spreading across the world. India initiated one of the harshest lockdowns in history. Investors, including foreign funds, panicked. The sensex saw over 40% wipeout in its value in under a month.
In March 2020 alone, the net FPI selling in the stock market was close to Rs 62,000 crore, CDSL datashowed.In comparison, during the same month, domestic funds got inflows worth about Rs 8,650 crore through the systematic investment plan (SIP) route. They were no match to the magnitude of selling by foreign funds. By November 2020, monthly SIP flows plunged about Rs 7,300 crore.
The financial sector faced several headwinds during early days of the lockdown as people remained indoors. Digital adoption, from banking services to buying insurance and trading to investing in mutual funds, gained traction. With monthly SIP flows hovering between Rs 7,000 crore and Rs 9,000 crore, tailwinds for the MF industry were taking shape. The JAM factor was at play- Jan Dhan accounts, Aadhaar-enabled KYC and falling mobile data prices- triggering retail participation from from people stuck at home. Even before 2020 could end, the sensex hit a life-high, recovering its Covid-induced losses and topping it up with additional points.

As investor interest in stocks rose, people began looking at the MF route to invest in the market as it was less cumbersome than direct investing. Additionally, they were handing over their money to experienced professionals, fund managers, for a small fee. Fund houses and their distributors increased retail participation. Investors fell in love with SIP.
This remarkable growth in SIP inflows and the numbers showcase sustained investor confidence, defying market highs, a report by Nuvama Institutional Equities noted.
In just three years, between November 2020 and October 2023, the monthly SIP flows went up by nearly 2.5 times: From Rs 7,302 crore to Rs 16,928 crore, AMFI data showed. And the number of SIP accounts more than doubled: From 3.4 crore to over 7.4 crore.
According to Misbah Baxamusa, CEO, NJ Wealth, two factors led to the tremendous growth of SIPs during the past few years. “First, as the (MF) industry grew, more distributors entered the market. This has led to MF distributors spreading financial literacy and advocating to investors to invest through the SIP route.” Second, “we also have a long history to showcase to investors the strong returns that SIPs could bring in,” Baxamusa.