While India’s systematic investment plan (SIP) journey has been a global success story, with no other countries being able to replicate it, the real test of its resilience will be when it can withstand the correction phase of the market, says DP Singh, deputy managing director and joint chief executive officer of SBI Mutual Fund during a conversation with Nidhi Sinha, Editor of Outlook Money at 40After40 Retirement Expo 2024 at Pragati Maidan, New Delhi on Friday. Singh spoke on various issues related to mutual funds and the way ahead for the industry.
40After40 Retirement Expo: Fewer Good Companies For MFs To Invest In; A Lot Of Research Goes Into Choosing Them, Says D.P. Singh
Despite over 227 IPOs last year, the mutual fund industry picked only 50 to 60 IPOs, says Singh.
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Here are the edited excerpts.
What are the reasons behind mutual fund SIPs’ rapid growth? Are investors becoming more mature?
A bureaucrat once told me that she told her children to invest a portion of their pocket money into a SIP, and they are doing so. In 2014, the industry was at Rs 10 lakh crore. The last Rs 10 lakh crore was added to the mutual fund AUM in just six months. India’s SIP story is a global success story that no other country has been able to replicate. More people are joining the bandwagon due to the growth trajectory of India’s economy. The correction phase of the market will be the real test to conclude that the investing community is responsible.
Can we say that SIPs’ growth has driven the mutual fund industry?
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Almost 55 to 60 per cent of gains in the equity AUM are coming through mark-to-market profit (MTM). Almost 40 to 45 per cent of inflows are coming through fresh flows, and out of that, 50 per cent is coming through SIPs.
What about the MF growth in Tier 2 and 3 cities? How does the industry plan to expand in that area?
The growth accelerator of the mutual fund industry is more active in the Tier 2 and Tier 3 towns than in the big cities. Every month, we are adding Rs 1,000 crore to the AUM. There is a demand-supply mismatch, and the supply of good companies where more money can be invested is very low. Despite over 227 IPOs in the last year, the mutual fund industry picked only 50 to 60 IPOs. Laymen should be happy with the amount of research that goes into picking a stock compared to the expense charged by the mutual funds.
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More demat accounts are being opened for equity investing. How is it affecting the mutual fund industry?
Only 50 per cent of demat accounts are active. For small investors who cannot go into the nitty-gritty of investing, mutual funds are the best option.
What is next for the industry?
Our responsibility is to create simple products that are easily explainable to the investor. Complexities should not be created just for the sake of them. People want simple products and are not willing to invest in products they don’t understand. We have reached more customers because of the ongoing digital revolution. Digital public infrastructure in India is unmatched globally. The role of UPI and other digital tools should be fully leveraged.
Singh also encouraged the audience to spread the positive message of mutual funds to their friends and colleagues.
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