1.66 Million SIP Accounts Closed in 2011
Bangalore: The most trusted source of equity inflows, Systematic Investment Plans (SIPs) is losing its 
6.81 trillion mutual fund industry in India, reports Livemint.com. Investors discontinued at least 1.66 million SIP accounts in 2011, according to the latest data from registrar firms, Computer Age Management Services (CAMS) and Karvy Computershare.
The most affordable way of investing in a mutual fund is through SIP. Fund managers encourage investors as the investment value is as low as 50. Moreover, investment through this route is well spread out and there is no attempt to time the market.
Investors who invest through SIP will be able to buy more units in a given tenure as well as save from the risk of losing money at one go in the event of a market fall. SIP had administered to account for major part of retail sales for the domestic fund industry, as the risk involved is less and it's more affordable.
SIPs were introduced in 1990s by Franklin Templeton Asset Management and still they are definitely a source of inflow for the industry, when the market regulator scrapped the so-called entry load for mutual funds.
Dhirendra Kumar, CEO, Value Research India, a Delhi-based mutual fund tracker said, "During NFO (new fund offer) days two-and-a-half years back, SIPs were being touted as a magic way to make profits. But now investors have lost patience in SIPs. When someone invests for two years and sees no return, he leaves. The sustained decline in the market has resulted in such discontinuation of SIPs in equity schemes. But the investors will regret their discontinuation in SIPs when the market turns good."
The country has 44 fund houses and the average assets for the industry came down to 6.81 trillion during December quarter from 7.13 trillion in the September quarter.
In a study undertaken by CAMS, a data for 17 fund houses that contribute at least 59 percent of industry's assets has revealed that SIP account cancellations per month have almost been doubled from 59,867 in January 2011 to 115,204 in December 2011.
Karvy Computershare came up with similar study shows that the fund houses have lost at least 113.33 crore of such assured inflows per SIP cycle in equity schemes, during the March-December period. The data for 10 month period shows cancellations of 726,200 of SIP accounts. Cancellations are most prevalent among investors who pay more than 5, 000 a month for SIPs. The study said, "During March-December 2011, there has not been a single month in which equity schemes have had net additions in terms of value."
The Karvy report said, "The 2,501-5,000 slab also witnessed negative net additions during the past two months. It is primarily equity schemes which clearly have seen negative net additions in almost all the investment slabs except for those below 1,000. This is another reason why the average ticket size of SIP investments is constantly moving downwards."
It also said, "Equity schemes have lost 8 percent of the inflows in the 10-month period of March-December 2011. The inflow values have continued to drop for seven consecutive months between May and November 2011, only to see a marginal improvement during December 2011."
A study by ICRA, said that the debt showed that the debt category has appeared as a preferred investment option aided by higher returns amid a rising interest rate scenario.
The ICRA report said, "MF (Mutual Fund) industry's debt AUM (Assets Under Management) registered a 10 percent year-on-year increase for the year ended 31 December 2011. The overall industry AUM witnessed a moderate decline during the period, marked by a steep decline in equity AUM."
The AUM of ICRA-rated debt schemes observed a 14 percent increase year-on-year as on 30 November 2011 and accounted for nearly 37 percent of the industry debt AUM.
The mutual fund industry's debt AUM registered a 10 percent year-on-year increase to 4.5 trillion for the calendar year 2011 but following the rise in investors' risk aversion and volatility of returns in the equity markets, the industry equity AUM witnessed a steep 27 percent year-on-year decline to 1.61 trillion, the ICRA report pointed out.
6.81 trillion mutual fund industry in India, reports Livemint.com. Investors discontinued at least 1.66 million SIP accounts in 2011, according to the latest data from registrar firms, Computer Age Management Services (CAMS) and Karvy Computershare.
The most affordable way of investing in a mutual fund is through SIP. Fund managers encourage investors as the investment value is as low as 50. Moreover, investment through this route is well spread out and there is no attempt to time the market.
Investors who invest through SIP will be able to buy more units in a given tenure as well as save from the risk of losing money at one go in the event of a market fall. SIP had administered to account for major part of retail sales for the domestic fund industry, as the risk involved is less and it's more affordable.
SIPs were introduced in 1990s by Franklin Templeton Asset Management and still they are definitely a source of inflow for the industry, when the market regulator scrapped the so-called entry load for mutual funds.
Dhirendra Kumar, CEO, Value Research India, a Delhi-based mutual fund tracker said, "During NFO (new fund offer) days two-and-a-half years back, SIPs were being touted as a magic way to make profits. But now investors have lost patience in SIPs. When someone invests for two years and sees no return, he leaves. The sustained decline in the market has resulted in such discontinuation of SIPs in equity schemes. But the investors will regret their discontinuation in SIPs when the market turns good."
The country has 44 fund houses and the average assets for the industry came down to 6.81 trillion during December quarter from 7.13 trillion in the September quarter.
In a study undertaken by CAMS, a data for 17 fund houses that contribute at least 59 percent of industry's assets has revealed that SIP account cancellations per month have almost been doubled from 59,867 in January 2011 to 115,204 in December 2011.
Karvy Computershare came up with similar study shows that the fund houses have lost at least 113.33 crore of such assured inflows per SIP cycle in equity schemes, during the March-December period. The data for 10 month period shows cancellations of 726,200 of SIP accounts. Cancellations are most prevalent among investors who pay more than 5, 000 a month for SIPs. The study said, "During March-December 2011, there has not been a single month in which equity schemes have had net additions in terms of value."
The Karvy report said, "The 2,501-5,000 slab also witnessed negative net additions during the past two months. It is primarily equity schemes which clearly have seen negative net additions in almost all the investment slabs except for those below 1,000. This is another reason why the average ticket size of SIP investments is constantly moving downwards."
It also said, "Equity schemes have lost 8 percent of the inflows in the 10-month period of March-December 2011. The inflow values have continued to drop for seven consecutive months between May and November 2011, only to see a marginal improvement during December 2011."
A study by ICRA, said that the debt showed that the debt category has appeared as a preferred investment option aided by higher returns amid a rising interest rate scenario.
The ICRA report said, "MF (Mutual Fund) industry's debt AUM (Assets Under Management) registered a 10 percent year-on-year increase for the year ended 31 December 2011. The overall industry AUM witnessed a moderate decline during the period, marked by a steep decline in equity AUM."
The AUM of ICRA-rated debt schemes observed a 14 percent increase year-on-year as on 30 November 2011 and accounted for nearly 37 percent of the industry debt AUM.
The mutual fund industry's debt AUM registered a 10 percent year-on-year increase to 4.5 trillion for the calendar year 2011 but following the rise in investors' risk aversion and volatility of returns in the equity markets, the industry equity AUM witnessed a steep 27 percent year-on-year decline to 1.61 trillion, the ICRA report pointed out.
