Investors are not only shying away from equity-based mutual funds, they are also scaling down systematic investment plans (SIPs), say market players. There has been a significant drop in the renewal of existing SIPs.
“SIP volume is down between 20 and 30 per cent of the outstanding systematic investment plans,” said Rajiv Deep Bajaj, managing director, Bajaj Capital. “Investors are breaking their SIPs in between.”
While bad market condition is one reason, experts say investors are moving out because the new investors getting into equity are not used to see deterioration of their wealth. The mutual fund houses say that breaking the SIP in between is not the right way of investing. “Investors should stick to equity investments for at least three years,” said Jaideep Bhattacharya, chief marketing officer, UTI AMC.
The average return in a diversified equity scheme over the past three years runs into a negative of 7 per cent while the Sensex return for the same period stands at negative of 2.8 per cent.
“While most of the SIP investments are three to four years old, the investors are largely first timers and are not used to downward cycle in the market. Hence even after enough convincing they are reluctant to continue,” said a financial planer, who did not wish to be named. “We are not facing any such move from the mutual fund investors who are around five years old.”
But the Unit-linked Insurance Plans (Ulips), which got the insurance shield, are in a better position to convince investors to continue with their investments. However, the new investments into Ulips are also getting impacted.
“While the investors are continuing with their existing investments because of the insurance cover, new investments into Ulips are down,” said the planner.