MICRO-INVESTING, MACRO IMPACT

Digital technology democratizes investing, widening stock market access for retail investors through SIPs, illustrating the macro impact of micro-investing

In the past three years, a clear trend has emerged regarding inflows through the Systematic Investment Plan (SIP) mode in mutual funds. Inflows through SIPs have been increasing palpably and materially. According to the data shared by the Association of Mutual Funds of India (AMFI), SIP inflows grew to ₹17,610 crore in December ’23 from ₹8,418 crore in December ’20. This shows that SIP inflows have become a force to reckon with in the markets, especially when considering the fact that these flows have provided strong support to the markets when flows from Foreign Portfolio Investors (FPIs) had begun to fall. Given these facts, and with the markets having recently touched a new peak, a key question on investors’ minds is likely to be: Will SIP inflows emerge as a solid counterforce to drive the markets in the coming years as more and more investors mature about the long-term benefits of investing through SIP mode. The answer to this question contains two aspects. One is how mature mutual fund investors have become in the past three years. The other is what factors will maintain steady growth in SIP flows in the coming years.

THE MOMENTOUS SHIFT

There are three clear facts which point out to the maturity of mutual fund investors regarding the long-term benefits of investing through the SIP mode. The first is the mental shift in the way SIP investing is being done. Analysts point out SIP investing has become a new trend among investors, including High Net Worth Individuals (HNIs) who have been using SIPs to invest in the markets.