SIP inflows drop by 5% in April amid market uncertainty and election concerns

The net SIP inflow into mutual funds fell by 5 per cent to ₹8,660 crore in April against ₹9,109 crore in March largely due to investors hitting the pause button on monthly remittances amid concern over high valuation and uncertainty about the general election outcome.

Despite the record SIP inflow of ₹20,371 crore last month, the net-to-gross SIP inflow was down 43 per cent.

In contrast, the net to gross inflow in March was higher at 47 per cent, with a gross inflow of ₹19,271 and net inflow of ₹9,109 crore.

Palka Arora Chopra, Director of Master Capital Services, said investors are displaying some caution due to market valuations and increasing volatility ahead of the upcoming election’s results.

• Read: MF inflows through SIPs set to hit new high in FY24

However, she said investors are not deserting their SIP investments as the number of SIP discontinued and new accounts opened are increasing simultaneously.

“The most effective strategy for wealth creation is to continue SIPs consistently, irrespective of market conditions,” she said.

Parth Parekh, Head Investor Relations, Prudent Corporate Advisory Services said despite the hurdles imposed by the new KYC norms beginning April, monthly SIP book crossed the ₹20,000-crore mark.

The SIP discontinuance ratio as measured by the number of SIP accounts closed or matured as a percentage of new accounts added, was also stable at 52 per cent compared to a five-year average of 56 per cent.

He said that for every SIP closed, two new SIPs were added.

Profit booking

Foreign Portfolio Investors have been booking profits amid growing uneasiness in the market due to lower voter turnout in the election. Low voter participation is being perceived as a hurdle for the re-election of the Narendra Modi government and the continuation of current policies.

FPIs were net sellers of ₹8,671 crore in April and have offloaded equities worth another ₹28,242 crore so far this month.

Pravesh Gour, Senior Technical Analyst, Swastika Investmart said with outcome of elections looming and valuations stretched, few investors are investing in other markets such as China where valuations are cheap and growth potential is immense.

He added that while cautious foreign investors are withdrawing money, Indian institutions and domestic investors are grabbing it to offset losses, he added.