Analyzing investment trends – MF and SIPs

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This pandemic has brought about tremendous change in all the economies across the globe. By the end of the first quarter, investors have started to re-analyze and make better-informed decisions as the market seems to be highly volatile. In India, the whole situation looks slightly better as the oil prices are diminishing which will help to curb the external deficit. Despite the economic growth going downhill, India is still hoping to reap benefits as some of the developed economies are going to evaluate operational benefits in India and also a possibility of a pivot from China, India can scaleup in the global supply chain.

Halved inflows

AMFI’s month-end data report indicates inflows into equity and equity-linked schemes have halved in April to Rs 6212 crore from Rs 11,722 crores in March 2020, giving away a three-month gaining streak. However, there are a few gainers in the market – Reliance industries stocks hit a maximum high of Rs 113.1 billion, HDFC up to Rs 81 billion, Bharti Airtel Rs 45.8 billion, Infosys up to Rs 43 billion. Some faced a month over month decline too, like SBI – Rs 3.8 billion, RBL – Rs 4 Billion, Tech Mahindra – Rs 5 billion, HUL at Rs 7.3 billion. The Healthcare sector’s weightage hit a 40month high of 8%. In total, mutual funds constituted a net buyer of 44% of stocks.

‘Pause your SIP’ option

As stated by the AMFI data report, the number of SIP accounts has increased to 3.13 crore accounts to 3.11 crore accounts in March 2020, However, a decrease in inflow contribution was noted, that is a decrease of Rs 265 crores at the end of the first quarter.

A mutual fund offers a pause facility for SIPs, this facility allows investors to pause their SIPs for one to three months and then restart their SIPs as the long lockdowns, salary cuts, and layoffs have put up pressure on SIPs investment and closure of SIP accounts. To avail the pause facility, the investor has to send an email to the AMC with folio details and start-end dates (time frame of one to three months). The SIP automatically restarts after the end date and it can be only availed once during the tenure of existing SIP. Fund houses encourage investors to take up this option and then proceed towards the closure of accounts in case conditions worsen. However, different fund houses have different norms and criteria to avail for pause facility, Nippon Indian MF criteria require completion of six SIP installments.

In the current scenario of low inflation, expected relaxations on interest rate regimes, the mutual funds’ industry would likely have an increased appeal for fixed income schemes, especially low risk, and low duration schemes.

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