InvestorQ : How have the SIPs in equity funds continued to be robust in March and what are the risks you foresee in this space?
ishika Banerjee made post

How have the SIPs in equity funds continued to be robust in March and what are the risks you foresee in this space?

Answer
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Niti Shenoi answered.
5 months ago


In a difficult month when debt funds and arbitrage funds saw huge outflows, equity funds saw inflows of over Rs.11,700 crore. This was, however, led by SIP flows of Rs.8,600 crore in March, the highest flow in this year. The SIP AUM now accounts for nearly 45% of the overall equity AUM and that has provided a degree of stability to the overall equity fund flow picture. Surprisingly, in the midst of all the volatility over the last few years, the monthly SIP collections have steadily grown. But the million dollar question is whether such SIP flows into equity could taper. It is possible and here is what you need to know.

While equity SIPs look like assured flows, there are some risks to be conscious of. Equity funds flows were consistently negative between 2009 and 2014. The real test of the investor enthusiasm for SIPs will be gauged when these SIPs yield negative returns over a longer time frame. Also the lockdown is expected to lead to loss of jobs, lower income levels and lower capacity to spend. If the SIP story reverses, then equity fund flows could face the first real challenge in the last five years. That could be the moment of reckoning because MFs may not be geared for that challenge! Funds have not seen equity fund outflows in the last 6 years and it could be a novel challenge.