What if there was an option to start a SIP with an amount below Rs 500, perhaps as low as Rs 250 for investments?
Well, this might become a reality soon, Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (SEBI), has expressed the regulator’s aim to introduce a more accessible and simplified approach to mutual fund investments in the capital markets moving ahead.
During an event, Buch mentioned that the mutual fund industry thinks it’s good to invest Rs 500 each month in a systematic investment plan. However, they believe investing Rs 250 is not practical. They’re focusing on finding ways to make these smaller investments more beneficial and rewarding.
SIP works on the principle of regular investments. It is like your recurring deposit where you put in a small amount every month. It allows you to invest in a mutual fund by making smaller periodic investments (monthly or quarterly) in place of a heavy one-time investment.
“We are working with the mutual fund industry to identify the costs involved. SEBI aims to facilitate the possibility of reducing the viability threshold to Rs 250 a month. This move could be akin to what Hindustan Lever achieved with shampoo sachets. It has the potential to significantly expand the market,” said Buch.
Buch’s comment comes as the total assets managed by the Indian mutual fund industry are approaching the significant mark of Rs 50 trillion.
Reflecting on the past year’s experiences, Buch noted that while rising rates in developed markets led foreign investors to sell Indian equities, the impact on India was less severe compared to other emerging markets. This was attributed to the resilience of domestic investors, which not only stabilized the market but also prompted foreign investors to return due to the attractive yields offered.
Certain mutual fund companies currently provide SIPs as low as Rs 100. However, the availability of such options is restricted as it might not be feasible for all companies to offer SIPs at that minimal level.
As per the regulator, during her remaining tenure at SEBI, she aims to reduce the viability of SIPs from the existing Rs 500 to Rs 250. “I believe this step will establish the groundwork for future growth and enhance the market’s resilience for years to come,” expressed Buch.
In November, the Association of Mutual Funds in India (AMFI) reported a decrease in net inflow to equity mutual funds, which declined to Rs 15,536 crore from Rs 19,957 crore during the last month.
The number of systematic investment plans (SIPs) surpassed Rs 17,000 crore for the first time, reaching Rs 17,073 crore in the month, surpassing October’s figure of Rs 16,928 crore, as per AMFI data. Meanwhile, debt mutual funds experienced a net outflow of Rs 4,706.70 crore in November.
However, within the equity category, small-cap and mid-cap funds remained popular, attracting net inflows of Rs 3,699.24 crore and Rs 2,665.70 crore, respectively. Throughout the year, small-cap funds have accumulated net inflows of Rs 37,178 crore since January, while mid-cap funds have received net investments of Rs 21,520 crore. Conversely, large-cap funds have witnessed net outflows of Rs 2,687 crore since the start of the year. However, in November, there was a modest net inflow of Rs 307 crore into large-cap funds. The overall Assets Under Management stood at Rs 49,04,992.39 crores in November 2023.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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