Decline in mutual funds SIP registrations over the last 7 months is a wake up call for regulators and market intermediaries
Data from Computer Age Management Services (CAMS), a registrar of mutual funds, on trends covering the last 11 months time period between April 2011 and February 2012, showed a decline in interest in systematic investment plan (SIP). Ever since the regulator started experimenting since August 2009, as to how mutual funds should be sold, inflows into funds have been erratic, and on the whole, negative. But all this while the fund industry and distributors were all pointing to SIPs as the saviour. The hope was a that a new breed of investors are adopting SIPs which would in time grow to a sizeable corpus. However, this hope too is dashed. The number of new SIP accounts peaked at around 200,000 in August 2011 month when HDFC Bank ran a massive contest to enrol SIP and this has since steadily declined by more than 60% to 75,000 new accounts. The average ticket size stood at Rs2,613 which is up 1% from last year. This decline in SIP interest should be a wake up call for the regulator – assuming of course it wants to wake up.
Fund companies had spent large amount of money on advertising, thinking that SIP would be the key to getting more investors on board. Yet, despite this, the location-wise SIP registrations haven’t seen much of a difference, indicating that investors are uniformly not interested in signing up for new SIP schemes. While bullet investments (i.e. lumpsum) have been very erratic, showing no definite trend, mutual funds tout regular SIP as a safe mode of investing. In the absence of persuasive selling by both fund companies and distributors, customers are uninterested.
This decline in SIP is not a surprise to regular Moneylife readers. Our Position Paper from Moneylife Foundation on issues faced by retail investors pointed out the reasons why, the investor population has declined from 20 million in the 1990s to just over 8 million by 2009 (according to the 2009 Swaroop Committee Report)
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