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The spike in volatility may not have impacted equity inflows, but it has weighed on new investors coming via the systematic investment plan (SIP) route.
In May, 1.97 million new SIPs got registered - nearly 15 per cent lower than the previous five-month average of 2.3 million - reveals the data provided by the Association of Mutual Funds in India.
Since June 2021, new SIP registrations have been upwards of 2 million each calendar month.
The new SIP tally in May was the lowest in 12 months.
Market participants say a drop in tally could be due to investor fatigue, besides the impact of market fall on investor sentiment.
Over the past few months, stocks have seen wild swings due to concerns over rising inflation, the potential impact of the ongoing war in Ukraine, and a hawkish pivot by the US Federal Reserve.
“Investors tend to look at past performance and invest in mutual funds (MFs).
"The equity markets in the past year have given lower single-digit returns and have been wobbly of late.
"We expect investors to start investing in SIPs again once there is clarity on issues swaying markets,” said a chief executive officer of a mid-sized fund house.
In the past year, large-cap funds on average have given returns of 4.5 per cent, while mid-cap funds and small-cap funds have given returns of 5.4 per cent and 8.14 per cent, respectively.
Market players say the rolling 12-month returns could turn negative for many investors and influence new investor flows.
Until now, the impact on net inflows has been negligible. Inflows through the SIP route have been on an upward trajectory since September 2021.
In May, the industry saw inflows of Rs 12,286 crore, compared with Rs 11,863 crore in April.
In 2021-22, inflows through SIPs stood at Rs 1.24 trillion, against Rs 96,080 crore seen in 2020-21.
SIP is a disciplined investment methodology offered by MFs wherein one can invest a fixed amount in an MF scheme periodically - at fixed intervals, say once a month - instead of making a lump sum investment.
However, inflows through SIPs have continued to remain resilient, even as the pace of new account openings has declined.
Sustained inflows through this route have provided the domestic MF industry a solid foundation for growth.
D P Singh, deputy managing director and chief business officer at SBI MF, says, “Investors have continued to stay on, market volatility notwithstanding.
"We have always said that investors should not move out when markets are down.
"I think they have now understood the narrative.”
The number of SIPs discontinued or whose tenure completed stood at 1.03 million in May.
