- Date : 18/09/2023
- Read: 3 mins
The share of individual investors in the stock market dropped from 45% (FY21) to 34.9% (FY24), yet SIP inflows signal rising retail interest - a positive trend.
August 2023 recorded an all-time high of Rs 15,814 crore in SIP inflows, signalling the surging popularity of SIPs in India's INR 45 Trillion mutual funds industry.
In recent years, a portion of individual investors, possibly first-timers, have reduced their market activity, but there's a positive trend in monthly MF SIP growth, largely fuelled by individual investors. The aggressive marketing of the SIP concept and the positive results achieved through SIP in the past have been largely responsible for that.
In August 2023, the mutual funds industry in India set a record with INR15,814 crore pouring in through Systematic Investment Plans (SIPs). This significant influx of funds, within the vast INR 45 Trillion industry, signifies an all-time high for SIP inflows, underlining the growing popularity of this investment avenue.
Who are Individual Investors?
The National Stock Exchange (NSE) divided investors under five headings as per their profile: Foreign Portfolio Investors (FPI), individual, Domestic Institutional Investors (DII), corporates, and proprietary. The category of individual investors, also the largest, includes individual domestic investors, Non-Resident Indians (NRIs), and sole proprietorship firms. They comprised 33 per cent of the total traders in the Financial Year (FY) 2015-16 and the share rose to 34.9 per cent in the FY 2023-24, until July 2023. Between 2016 and 2024, the figure rose to 45 per cent in FY 2021 owing to the COVID-19 pandemic. As the pandemic came to an end and the lockdown was lifted, it, however, dropped to 36.5 per cent in 2023.
Apart from the lack of spare time after the pandemic was over, the drop can also be explained by the ‘Robinhood phenomenon’. It implies the exit of first-time investors when they experience losses.
Are Investors Shifting?
The above-mentioned data might mislead you into thinking that as the number of individual traders is decreasing, the trading volume is not decreasing. However, that is not true. The overall trading volume, contrary to popular belief, is on the rise.
This should be considered in conjunction with the increased awareness among potential investors, the surge in new demat accounts being opened, and the rising number of new mutual fund SIPs.
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Over the past few years, the market has witnessed a shift, where a segment of individual investors, most likely first-time investors, have either exited the market or become less active. The monthly growth in MF SIP mobilization is a positive trend, primarily driven by individual investors. SIP has made it easier for salaried individuals particularly, to make small but regular investments and earn profits from those funds with dynamic performances.
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