The Hindu Business Line : Investors turning to SIPs

Move over bulk allocations. The rapidly declining stock market seems to have taken a toll on large one-time investments. Instead, investors are looking more at systematic investment plan (SIP).

Clients are in no mood to put in single cheques in equity funds right now, concede mutual fund circles even as they refer to the standard marketing pitch revolving around regular, methodical investments.

Some sections are already moving money to liquid and other short-term funds with the hope of using the SWP-SIP route that is available to them, feels Mr Nilesh Shah, CIO, Prudential ICICI MF. SWP refers to systematic withdrawal plans.

Others agree, while underscoring the significance of SIPs in a bearish market. "Putting in a big investment just once makes sense when the market is steadily going up. Now that the trend has reversed, this may not be the most effective strategy," reasons Mr B.K. Dalmia, CFP.

While it is difficult to ascertain how many new converts to SIPs have now emerged, fund houses maintain that more investors are open to the idea of writing at least 6-12 post-dated cheques at a time, one each for the next six months and running up to one year.

More auto debit mandates are being given as well.

Clients are taking to SIPs in order to ride the storm and gain from rupee cost averaging, notes Mr Sandesh Kirkire, CEO, Kotak Mahindra MF.

"Investors know how difficult it is to make money when the market is hurtling downward. SIPs are bound to gain ground when the going is bad," he maintained.

Distributors too feel that clients are increasingly turning to SIPs, a strategy that should create wealth for them over longer periods. This, they add, is especially true for those retail participants who do not wish to take major risks.

"We are urging investors to make a fresh attempt at starting SIPs," says a source with leading distributor Karvy.

ULIPs too turn fancy

Like their MF counterparts, insurance companies are experiencing something similar, a trend which has led their marketing teams to adopt strategies that seem to be in line with expectation.

With declining stock prices serving as the backdrop, the insurers' weaponry is clearly dominated by unit linked insurance plans (ULIPs), including those that are heavy on equities.

ULIPs, says Mr Sujit Ganguli, Head - Marketing, ICICI Prudential Life Insurance Co, hope to clock better inflows, courtesy monthly premium payment commitments.

"ULIPs will drive our efforts", he adds firmly. ICICI Pru, which stood No. 1 in terms of first premium income in April, manages a large ULIP component at the moment.

The downturn in the stock market should not worry clients who are willing to stay invested in unit-linked plans for longer periods, life insurers generally point out.