Equity SIP Inflows Hit Record ₹32,297 Crore as Three-Year Returns Languish in Single Digits

Indian retail investors continued to channel unprecedented sums into mutual funds through systematic investment plans (SIPs), with monthly inflows surging to a historic high of ₹32,297 crore in August. Cumulative SIP inflows reached ₹1.58 lakh crore in just the first five months of the fiscal year, already accounting for 45% of the ₹3.50 lakh crore recorded across the entire preceding fiscal year.

However, this relentless institutional flow contrasts sharply with intermediate returns. According to performance data compiled by Geojit Research, three-year annualized SIP returns (CAGR) across most major equity mutual fund categories have remained largely lackluster, languishing in the single digits.

Small and Mid Caps Lead as Large Caps Trail

Except for small-cap and mid-cap schemes, which generated average three-year SIP returns of 13.03% and 12.81% respectively, every other equity category delivered single-digit annualized returns over a 36-month horizon.

Large-cap funds emerged as the weakest performers over this duration, registering an average SIP CAGR of just 5.04%. Over a one-year window, large-cap funds yielded 2.56%, while their five-year return profile stood at 9.00%.

Category-Wise SIP CAGR Performance (Source: Geojit Research):

• Smallcap: 27.68% (1-Year) | 13.03% (3-Year) | 16.70% (5-Year)
• Midcap: 18.49% (1-Year) | 12.81% (3-Year) | 16.60% (5-Year)
• Multicap: 14.52% (1-Year) | 9.71% (3-Year) | 13.37% (5-Year)
• Large & Midcap: 11.09% (1-Year) | 9.45% (3-Year) | 13.33% (5-Year)
• Focused: 11.38% (1-Year) | 8.35% (3-Year) | 11.48% (5-Year)
• Flexicap: 10.54% (1-Year) | 7.88% (3-Year) | 11.63% (5-Year)
• Value: 6.48% (1-Year) | 6.72% (3-Year) | 12.12% (5-Year)
• Contra: 4.51% (1-Year) | 6.70% (3-Year) | 12.84% (5-Year)
• Dividend Yield: 5.16% (1-Year) | 6.33% (3-Year) | 12.04% (5-Year)
• ELSS (Tax Saving): 6.20% (1-Year) | 6.15% (3-Year) | 10.83% (5-Year)
• Largecap: 2.56% (1-Year) | 5.04% (3-Year) | 9.00% (5-Year)

Shifting Focus to Long-Term Wealth Creation

The disconnect between heavy retail inflows and subdued intermediate returns highlights a shift in investor psychology. Rather than chasing short-term market momentum, domestic market participants are treating SIPs as a disciplined, structural savings mechanism.

Aditya Agarwal, CFA, Chief Investment Officer at Avisa Wealth Creators, noted that SIP volumes have held steady because investors increasingly view them as long-term wealth creation instruments rather than trading plays. Agarwal explained that periodic market volatility does not inherently increase risk for systematic investors, as periodic dips allow rupee-cost averaging to work effectively. He cautioned, however, that investors should avoid excessive concentration in small- and mid-cap funds despite their recent outperformance. He recommended a core portfolio anchored by active funds, complemented by satellite allocations in passive strategies for cost-effective broad market exposure.

Resilient Domestic Retail Sentiment

The continued commitment to monthly SIP commitments indicates growing resilience among retail investors against macro crosscurrents.

Yudhajit Baul, Founder of Yudhajit Financial Services, observed that despite persistent headwinds—such as geopolitical friction, uneven monsoon patterns, and elevated crude oil prices—investor confidence remains unshaken. Baul noted that expanding SIP books reflect the maturity of Indian retail investors, whose belief in equity compounding to meet financial targets has strengthened despite the subdued equity returns of the past two to three years.

Echoing this view, Sriram BKR, Senior Investment Strategist at Geojit Financial Services, emphasized that taking incremental steps toward long-term goals has played a pivotal role in guiding investor behavior during choppy market phases. He reiterated that because equities are risk-bearing assets prone to extended consolidation periods, maintaining asset allocation discipline remains crucial for sustainable wealth accumulation.

Tags: Geojit Financial Services AMFI Indian Mutual Funds Avisa Wealth Creators Small Cap Funds Large Cap Funds