SIP | Sunil Subramaniam: People not prematurely closing SIPs; they are running them: Sunil Subramaniam
“Debt mutual funds are going to be under a little bit of pressure because mark to market losses will erode any gains due to the rising interest rate scenario. Equity still remains a preferred asset class to the retail investor,” says Sunil Subramaniam, MD & CEO, Sundaram Mutual
What do you make of the equity inflow and the overall outflow for the month on a month-on-month basis?
Sunil Subramaniam: I think the outflow is largely due to the debt gains. Equity has seen positive flows this month also. It also shows the continuing confidence of the retail investor that ultimately the equity markets will deliver, the short term volatility is not impinging them too much.
What do you make of the equity inflow and the overall outflow for the month on a month-on-month basis?
Sunil Subramaniam: I think the outflow is largely due to the debt gains. Equity has seen positive flows this month also. It also shows the continuing confidence of the retail investor that ultimately the equity markets will deliver, the short term volatility is not impinging them too much.
Second, there is the TINA factor which continues to prevail in terms of relative asset classes. Debt mutual funds are going to be under a little bit of pressure because mark to market losses will erode any gains due to the rising interest rate scenario. Equity still remains a preferred asset class to the retail investor.
The retail participation is definitely showing some kind of confidence but with the kind of a flow that we are witnessing, are the SIPs being stopped or are there some kind of a drawdown that we are seeing over there?
If you classify SIP into three buckets, one is if you add three years. Say you started a three-year SIP and that is maturing. When you get those proceeds, it takes time to go and start a fresh SIP. Obviously, the maturing SIPs will drop out of the system and so that is one thing which could be happening.
The second aspect is that we are seeing a sharp surge in direct SIPs through platforms like
, Grow, Zerodha. Those are typically post millennial investors who probably put in one year SIPs, take an active call in the market and keep switching in and out.
The third category of largely distributor, MFD, banks driven SIPs are generally of a tenure of five-year plus. 65% of the industry SIP book is of that category and there I do not see any challenge. People are not prematurely closing SIPs. They are running them. In fact in some cases, people are topping up their SIP instalments in these volatile times.
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