As the Coronavirus has pushed many companies on the verge of economic slowdown, thus firms are forced to cut salaries and retrench staff. As many are losing their jobs or are facing a salary cut they are opting to stop their SIP’s or are canceling their SIP.

Mutual fund SIP’s have been thriving for decades as many were opting for this form for their investment. But during the month of April, the SIP inflows showed a mild dip.

The number of dips is not that scary for now but as you can see the times are bad and thus even the small dip makes us believe that the trends of, for now, are approaching soon. The reason behind the fall is an economic downfall, deteriorating job scenarios, and thus the question arises on the sustainability of the SIPs.

The total investment in mutual funds via SIP in the month of April was Rs 8376 crore, much lower than what it was in March. The new SIPs registrations fell to 7.26 lakh in April from 8.49 lakh in March.

But there is some ray of hope as, despite the 23 percent fall in Nifty 50 index, assets under management through the SIP mode stand at Rs 2.75 lakh crore. This shows the trust of investors in mutual funds via SIP, thus investors have been holding on to their SIP’s so far.

The economic situation, for now, is worrisome

Investors, for now, are afraid to commit their money as they want to save their money for uncertain times, and some do not want to continue their SIP’s even if they can because the condition of the market is very bad. Many investors are not investing as they fear of job loss and salary cuts. So, different people have different reasons to not invest in the market.

The lockdown is not seeming to end anytime soon. The prediction is India will see the highest number of cases till June and July, so be rest assured that lockdown is not going to end anytime soon. As the lockdown is extending so will be the increase in job loss and salary cuts.

This panic situation is not because of the fall in the stock market, the problem is percent bigger, and people are saving cash for the expected bad time that is approaching fast. The number of SIP’s discontinued in April was 5.32 lakh compared to 6.02 lakh in March.

The unemployment situation is also worsening with every passing hour. As of May 3, 2020, the unemployment rate stood at a whopping 27.1%. So, in the coming months, more SIP will be canceled, and less new SIP will be registered.

What, an investment advisor one must do?

We at Ashutosh Securities get calls on a daily basis of our investors for SIP cancellations or to stop SIP for 3 months. But, as an advisor, we must persuade our investors to remain invested as by investing in bad times they can get more units of their funds. We must try and convince the investor that if not urgent and if they can invest, one must not opt to not invest.

SIPs with time have proved that it is a great source of wealth creation in the long-term. Though falling markets are a good time to invest, before investing you must access your cash liquidity and maintain your cash flows before registering for new SIP.

If you have your emergency fund in place and you have spare amounts that you do need for the next 5 years then you must start investing via SIP.

Happy Investing!

Mutual fund investment is subject to market risk, please read offer related document carefully before investing.