Retail investors are displaying increased risk tolerance, maturity and a preference for a “buy on dips” strategy, regardless of market performance, according to data compiled by Bussiness.
The analysis reveals that despite both Sensex and Nifty posting negative closes in 14 out of the last 36 months (December 2022 – November 2024), flows through Systematic Investment Plan (SIP) increased in more than 71 percent of those months.
For instance, during September 2022, the Sensex fell around 3.54 percent but SIP collections for the month were Rs 12,976 crore up from Rs 12,693 crore in August. More recently in October 2024, the market was down around 6 percent while SIP collections for the month were pegged at Rs 25,323 crore, up from Rs 24,509 crore in the previous month.
Juzer Gabajiwala, Director at Ventura Securities says that investors have become a smarter. “They also understand and base expectations for a long-term tenure or long-term period. That’s why we have seen numbers not even dipping very drastically even in certain months and then also automatically going up,” he says.
Pranav Haldea, Managing Director, Prime Database concurred. “Earlier, it was widely believed and also was true to some extent that retail investors buy at highs and sell at lows. However, this has changed over the last few years and retail investors have now come of age. ‘Buying on dips’ has become the new strategy. They are now pumping in huge amounts of money into MFs during market lows,” he says.
An Aditya Birla Sun Life AMC market outlook report also highlighted this trend, noting that out of 20 episodes of market corrections ( between 2016 and 2024), 17 incidents saw SIP flows surpassing the previous 12-month average. The report added that even as direct retail ownership in BSE500 stocks fell, mutual fund inflows surged. SIPs are now annualising at $35 billion, with overall domestic institutional investor (DII) share hitting 15.8 percent.
“The Indian household is being opportunistic. They are actually wanting to increase their allocation to equities, making use of this volatility that comes to their benefit by increasing their allocation into Indian equities with a significant shift going into direct and mutual funds,” explained Harish Krishnan, Co-head Equity at ABSL AMC.
Experts note that investors have also become more aware about market cycles – understanding that when markets fall, there is also a cycle of recovery.
“The declines are also faster, and your coming back is also faster. Not like before that you will have a bearish period for one year and a half or longer. Now you will have 2-3 months down, 2-3 months up,” said Gabajiwala.
Higher risk tolerance and understanding of SIPs
A main driver according to experts has been risk tolerance of investors and awareness about the effectiveness of SIPs. “They are definitely more risk tolerant. We have seen that MF inflows have been higher into thematic funds. That is collecting more money than large caps and all other categories,” Gabajiwala explains.
Haldea adds that investors are also well aware about the benefits of SIPs and the benefits of investing in them irrespective of the market performance. “SIPs have been well marketed and investors understand the benefit of SIPs unlike in the past. They understand that when markets are down it is the right time to buy more units as it helps reduce the average cost of acquisition. They have understood the power of equities as a tool for long term wealth creation,” he explained.
Haldea further adds that retail investors are now staying the course and keeping their faith in the power of long-term equities. “FDs and fixed income options are not able to give even inflation beating returns. Mutual funds and equities on the other hand have given stupendous returns in the last few years,” he added.
Comments are closed.