Is India’s SIP Revolution Finally Here?

Kotak Insights | Date 01/12/2023

Ever wondered how a seemingly straightforward investment plan could set off a financial revolution?

Picture this: a nation collectively investing, building wealth, and reshaping its financial destiny.

Well, it’s happening, and one of the catalyst for this change is the era of Systematic Investment Plans (SIPs) in India.

In the vast landscape of India's financial markets, SIPs have emerged as unsung heroes, not just making headlines but rewriting financial norms.

Let us explore this in more detail.

Unboxing the Numbers

From March 2020 to September 2023, the Assets Under Management (AUM) in the Indian mutual fund industry surged from Rs 22 lakh crore to a staggering Rs 48 lakh crore. [Start SIP in mutual funds by clicking here]

But what adds spice to this unprecedented growth is understanding where it’s coming from.

Enter the dichotomy between T30 and B30 cities.

SIPs in T30 versus B30

First, let’s break down the acronyms.

T30 refers to the top 30 geographical locations in India, while B30 includes locations beyond the top 30.

The significance of this city-level segregation of mutual fund AUM is made by Association of Mutual Funds in India (AMFI) is that the market regulator wants the mutual fund industry to work towards increasing the penetration of mutual funds across India and not just in large cities.

So, the B30 Cities (cities beyond the top 30 cities) are put in a separate bucket and have their own B30 Commission Rules of Mutual Funds.

And how are the B30 locations performing? Impressively, as the numbers say!

Mutual funds are witnessing higher growth in new SIPs accounts in rural areas, outpacing the growth in T30 cities.

Between May and October 2023, the SIP flows from B30 have increased by 26% to Rs 6,436 crore, compared to a 22% growth in T30.

Active SIP accounts from B30 outpaced the T30 tally, surging 17% from 31.7 million at the end of April 2023 to 37.3 million at the end of October.

What has led to this surge?

It’s the rising awareness and growing acceptance of new-age investment options.

While these B30 locations are likely to see more penetration, they also need more inflow of funds.

This is because of the low ticket size in investing.

Investors from B30 contributed Rs 1,725 on average to mutual funds through SIPs, which is 70% lower than the average ticket size of T30 investors at Rs 2,940.

In the B30 itself, the average ticket size in November 2021 stood higher at Rs 1,757 compare to Rs 1,725 in October 2023.

All in all, smaller towns are drawing more mutual fund attention due to their higher scope for growth. But to keep this momentum, there should be more inflow of funds into these areas in the coming time.

A Shift In The Making

SIPs are evolving from regular transactions to strategic financial victories.

In FY24, SIPs crossed the Rs 1 trillion mark.

Zoom in on the canvas, and you’ll see small towns leading the financial charge. In the past year, fund houses opened up numerous branches in these smaller areas.

The surge in these corners isn’t just a blip; it’s a change in culture, a shift in how India is managing finances.

Beyond Mutual Funds

SIPs aren’t only about mutual funds; they've elegantly stepped into the stock market.

Operating similarly to mutual fund SIPs, stock SIPs allow regular investments in a chosen stock, sans the fund manager or a mutual fund.

So, there’s no fund manager or a fund you’re investing in but a stock where you average out your investment over a long time.

Imagine building your stock portfolio without the stress of market timing—an investor's dream.

You can invest in stock SIPs by clicking here.

Conclusion

SIPs emerge not just as investment tools but as the architects of a financial transformation.

Every SIP investment adds a stroke to India’s dynamic financial evolution.

It's not just about numbers; it's about cities crafting a story, and SIPs becoming the heartbeat in a financial revolution.

Are you ready to unravel the SIP revolution?

Step into the financial arena, where every investment paints a piece of a larger, pulsating story.

By the way, if you’ve ever wondered how long a Rs 50,000 SIP will take to reach the target corpus if you want to buy a Mercedes-Benz? Watch this video to know more.

Until next time…

Stay Tuned!

Sources: Kotak Securities, AMFI, Economic Times

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.