Unravelling the myth of SIP
Rising participation of household (retail) investors in the Indian stock markets has been a topic of interest for the past couple of years. Most analysts and strategists have highlighted this as a key factor behind a sustained rise in the benchmark indices and low volatility, despite subdued foreign flows. Even the Prime Minister and many senior ministers made it a point in their campaign in the recently concluded general elections. In particular, a consistent rise in household investments in the mutual funds through systematic investment plans (SIP - a popular method to automatically invest a predetermined amount at predetermined intervals) has been cited as a strong support for the Indian equities. Most market participants are confident about this support to the Indian equity markets and its positive impact on the valuation, volatility and breadth of the market. I acknowledge the rise in the participation of household investors in equity markets. I am however not very confident...