Gopal Kavalireddi, Head of Research at FYERS said, with a volatile stock market amply impacted by geopolitical tensions, supply disruptions, and high commodity prices, the gains in indices didn't reflect in most individual investor portfolios. The lack of euphoria as the benchmark indices recently made new all-time high points in this direction. However, investors opting for mutual funds through a systematic investment plan (SIP) were well rewarded.
Under 1-year SIP returns of equity mutual funds categories, FYERS expert pointed out that barring global funds, MNC, pharma, and healthcare sector funds, most schemes across all equity categories delivered double-digit returns. Banking and Financial services funds led the pack with an average return of 25.8%, trailed by the Infrastructure sector funds at 20.7% and the Contra funds at 20.5%.
Among individual schemes from the equity category, the data revealed that SBI PSU fun topped the returns chart with 41.7%, accompanied by Quant Quantamental Fund with 37% and ICICI Pru Infrastructure Fund with 36.4%.
So far in FY23, the contributions in SIPs reached more than ₹1 lakh crore. From October to November 2022, the contributions in SIPs have been above ₹13,000 crore mark. In November, SIPs extended their record-high performance to ₹13,306 crore.
Further, AMFI data revealed that Indian mutual funds have currently about 6.05 crore (60.5 million) SIP accounts through which investors regularly invest in mutual fund schemes.
In the first eight months of FY23, the contribution of SIPs has already reached about 80.75% of the contributions recorded in FY22. From April 2022 to November 2022, the contributions are around ₹1,00,581 crore in SIPs. While in the fiscal ending March 31, 2022 (FY22), the contributions were around ₹1,24,566 crore.
As per FYERS data, the average monthly inflow in SIPs is around Rs12,572 crore. It pointed out that back in FY17, the total contribution via SIPs was around ₹44,000 crore, with a monthly average of ₹3660 crore. This would be a rise of 243.5% in average monthly inflow in SIPs from FY17 to FY23 so far. SIP contributions for December 2022 to March 2023 are yet to be revealed.
Between April 2022 to November 2022, the total number of outstanding SIP accounts is 60.5 million with new registrations of 16.32 million. Further, SIP assets under management have reached nearly ₹6.84 lakh crore. In the FY22 period, the total number of outstanding SIP accounts was 52.77 million with a new entry of 26.64 million, while assets under management stood at over ₹5.76 lakh crore.
As per Kavalireddi, over the last few years, owing to the availability of disposable incomes, awareness of stock markets, and the need for wealth building, investors adapted to the equity culture, opting for direct equities and mutual funds. Understanding systematic investments to counter the volatility in stock markets propelled assets under management (AUM) of mutual funds.
Why start SIPs in 2023?
In Kavalireddi's view, this SIP culture is here to stay and progress faster as more and more Indians inculcate the habit of wealth-building with investments in equities.
Explaining in detail, FYERS expert said, a SIP effectively counters the vagaries of stock market movements through rupee cost averaging and delivers higher returns. Adding, he said, the SIP mechanism eliminates inertia, and emotion, ushering in an investment discipline, making it the best option for investors even with little to a negligible understanding of sectors and stocks
How to choose equity mutual fund SIPs?
FYERS expert suggests that investors should choose an appropriate scheme, invest every month and review once every year for performance and changes in the portfolio of that scheme. Mutual fund schemes’ investment objectives, fund manager competency, different risk ratios, management expenses, portfolio composition, churn rate, and past returns are essential for selection. Rolling returns provide better performance comparison than annualized or point-to-point returns to understand the consistency of a scheme's performance.
He added that investors may opt for different categories of schemes based on their risk profile, surplus funds, financial goals, and horizon of investment. While debt funds are better for short durations ranging from one month to less than three years, equity investments would require a time horizon above three years. This differentiation is to counter the volatility in markets that may arise from time to time and to give scope for investments to compound sufficiently.
Further, he explained that every mutual fund scheme has an assigned risk profile that helps investors choose appropriately for their financial needs. A conservative investor would opt for debt mutual funds having a low-risk profile, and moderate investors can opt for large-cap equity funds or hybrid schemes with a mix of equity and debt. Aggressive investors with a higher risk propensity can opt for mid and small-cap stocks.
For passive investors, Kavalireddi said, the preferred categories under the equity umbrella could be Large-caps, Flexi-cap, or multi-cap funds. For active investors with a better understanding of markets, economy and risk, opting for the sector or thematic funds or mid & small-cap funds could help them secure substantial returns over a longer horizon.
Indian equity markets are expected to reach new heights in 2023.
Emkay Global Financial Services expects Nifty to attain a level of 19,500 by December 2023 given the current situation. Barring any major change in the global macro-economic and geo-political set-up Sensex is at 64,500 indicating a 7-8% increase from the current levels. Largely, the increase in Nifty-50 profit after tax (PAT) in CY23 will be led by Banks, Auto OEMs and Ancillaries, Oil & Gas, and the IT companies.
Sanjay Chawla, Head, of Institutional Research, Emkay Global Financial Services said, "higher-for longer interest rates, and a sudden rise in Brent crude oil prices are potential challenges for the market in the next 6-12 months. A capex-intensive budget by the government may spur investment; however global and domestic growth uncertainties may act as an impediment. Given the current scenario we see Nifty-50 fair value of around 19,500 by end CY23; we expect aggregate profit growth of Nifty-50 to be fairly resilient at around 15% in CY23."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
