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The total number of SIPs has gone up 21% from 34 lakh in October 2010 to 41 lakh in 2011 at CAMS while Karvy has registered 66% growth in SIP inflows this year

Mumbai: Mutual fund houses are increasingly banking on their pet product- SIP. AMCs are chanting about SIPs in investor awareness campaigns. Key in SIP on Google and you get 4,850,000 page results from India.

Axis Mutual Fund calls its ‘Sleep in Peace’. Canara Robeco markets it as ‘Small Is Powerful’.

Let’s look at the numbers. CAMS, which caters to 17 AMCs has 41 lakh live SIPs as on September 2011 while Karvy has 35 lakh live SIPs currently. CAMS had 34 lakh SIPs in October 2010, that’s an increase of 7 lakh SIPs in FY2011.

If you take a conservative estimate of 4 lakh SIPs for the other registrars - Deutsche, Sundaram BNP Paribas and Franklin Templeton, then the number adds up to 80 lakh SIPs.

Karvy has registered 66% growth in SIP inflows this fiscal. It raised Rs. 2,257 crore from SIPs last year. This year it has gone up to Rs. 3,738 crore.  The top five cities account for 40% of these inflows.

Last year CAMS recorded a peak of 2.60 lakh new SIP registrations. In January 2011, 1.40 lakh SIPs were registered.

According to AMFI data, the net inflows in equity schemes remained positive each month except in April and July 2011. The industry clocked net inflows of Rs. 5,090 crore this fiscal year.

Among the largest AMCs, Reliance has 21 lakh live SIPs as on November 2011 and it adds an average of 2 lakh new SIPs each month. The third largest fund house ICICI Prudential has 5 lakh SIPs in its basket and registers 30,000 new SIPs every month. DSP BlackRock gets 7,000 SIP registrations every month and has close to 3 lakh SIPs.

Retail investors are major subscribers of SIPs. A large number of SIPs is in the range of Rs. 500 to Rs. 2,500 per month.

According to Karan Datta, National Sales Head of Axis AMC, SIPs bring in around Rs. 1,500 crore which accounts 25% of equity inflows every month. He says majority of these SIPs come from banks. “SIPs are an ideal way to invest. AMCs are promoting them heavily. The annuity gets bigger for fund houses although it’s a costly affair to cater to retail investors. Our market share is 3.50% of the incremental SIP inflows of the industry,” says Karan Datta. 

Innovations in SIPs

All fund houses have been adding a little spice to their SIPs to woo investors. Reliance offers embedded insurance in its Reliance SIP Insure.

The industry has consistently slashed the minimum installment size to attract in more retail investors. UTI accepts SIP amounts of as low as Rs. 35 in its UTI Retirement scheme. In 2007, ICICI Bank started offering Rs. 50 per month SIP to tap rural masses by tying up with a micro finance institution KAS Foundation. The corpus is managed by ICICI Mutual Fund. In 2008, ICICI allowed Micro SIP of Rs 100 in its Liquid Plan (growth option).

Bharti Axa Mutual Fund offers daily SIP starting from Rs. 300 per month while Sahara Daily Fund allows investments of Rs 10 a day.

In 2009, SBI Mutual Fund launched its SBI Chota SIP. SBI Mutual Fund markets this scheme with the help of self-help groups (SHGs), NGOs and micro credit institutions.

Edelweiss Mutual Fund has ‘Prepaid SIP’ in which investors can invest a minimum of Rs. 25,000 to Rs. 2.50 lakh initially in its Edelweiss Absolute Return Fund. This concept works similar to a STP wherein 10% of the initial investment made in Edelweiss Absolute Return Fund is switched to any of the three equity funds chosen by the investor whenever Nifty falls 1%, 2% or 3%. There is no exit load applicable in such switches.

Apart from slashing minimum SIP amounts, AMCs have gone a step further by introducing daily, weekly and fortnightly SIPs which help investors tide over the market.  

Profitability

AMCs incur marketing, distribution and commission expenses in SIPs which are usually targeted towards retail investors. The cost of servicing SIP investors is higher for distributors as well as AMCs. They can only make profit if SIPs run for a period of two years.

While AMCs have slashed SIP amounts IFAs don’t find them profitable. The SIP game is all about volume and banks and NDs are the ones who have the wherewithal to garner substantial SIPs. After the abolition of entry load, many IFAs are finding it difficult to cater to micro SIP clients. Some distributors have even stopped accepting SIPs below Rs. 5,000 per month.