Small investors reduce market volatility: Experts

Mumbai: Unabated flow of funds from small investors into equity schemes offered by mutual funds through the systematic investment plans (SIP) has helped the domestic equity markets to contain high volatility and find strong support at lower levels amidst persistent selling by foreign portfolio investors (FPI’s).

According to fund managers, investment through the SIP route has seen a steady rise over the past several months and small investors with long-term financial goals are considering every dip in the market as a good opportunity to build their portfolio.  “This is just the beginning and a big wave is yet to come,” observed Jaideep Bhattacharya, managing director and chief executive officer of top3choice.com, a mutual fund distribution platform that runs on artificial intelligence.

“With the return of fixed deposits expected to fall further and other asset classes such as gold and real estate likely to yield subdued returns, investors are flocking into equities, which they believe would fetch them enough returns to beat inflation,” he added.

According to the latest data released by the Association of Mutual Funds in India (AMFI), the net inflow into mutual fund’s equity schemes hit a nineteen-month high of Rs 9,196 crore in December 2016.

The inflows from small investors came especially at a time when domestic equities witnessed correction amidst growing concerns regarding a slowdown in corporate earnings growth due to demonetisation.

“This shows the financial maturity of both investors and advisors. There are currently around 1.10 crore SIP accounts in the industry out of which 61 lakh accounts are over 5 years old, which suggests small investors are not concerned about short-term corrections and volatility in the market. This has never happened earlier,” pointed out Swarup Mohanty, chief executive officer of Mirae Asset Global Investments.

According to him, the average monthly inflow into equity schemes through SIP is currently around Rs 4,000 crore. “It took a long time for the industry to reach this milestone. However, the next Rs 4,000 crore would be covered in a very short span of time,” added Mr Mohanty.