“Investments in SIP have increased significantly in the last two months. The total SIP investments accounts stood at approximately 3.72 crores as of March 2021. In March, Rs 9182 crores were collected in various SIP schemes,” said S Ravi, former Chairman of Bombay Stock Exchange (BSE) and Founder and Managing Partner, Ravi Rajan & Co.
“SIP is a way of deploying fixed amounts at regular intervals. The investment amount in a SIP can be as low as Rs 500. A systematic investment plan is an investment vehicle that many mutual funds offer. These intervals are decided by the investors and are either weekly, monthly or quarterly,” he added.
But what may be the reasons behind such a massive spike of about 22 percent in SIP inflows in March 2021?
“Investments strategies and decisions depend on the economic cycles and phase prevailing at the time of investing. Investing in stocks should be research-based. Period and stock prices which are subject to flux are countered by investment decisions,” said Ravi.
“The reason for this increase is due to the multiplicity of factors like market performance, poor returns in bank fixed deposits (FDs), no TDS (tax deducted at source), etc. The recent budget announcement making Provident Fund (PF) contributions over Rs 2.5 lakh taxable could be an additional factor. The mid-cap performance, an average yield over 12 percent, has made SIP’s very attractive,” explained Ravi.
Apart from the low FD rates and change in PF tax rules pushing the conservative investors towards MF investments through SIP, some also believe that the change in NAV applicability rule may also result in spilling some investment money from February to March.