How good is daily SIP plans to beat market volatility?

LIC Mutual Fund and HDFC Securities have launched daily SIP plans

There has been a 56% surge in inflows to mutual funds through the SIP route this financial year. Image source: Reuters

Beating the erratic market growth has always been a challenge for mutual funds (MFs), and in that bid, mutual fund houses have started offering systematic investment plans on a daily basis.

LIC Mutual Fund and HDFC Securities have launched daily SIP plans, while HDFC Securities allowed customers to start daily SIPs with a minimum amount of Rs 500, LIC MF is also offering an option to invest in SIP with as low as Rs 300 a day.

"I do not think there is a need for daily SIP over the long terms. In the short term, you can capture the volatility through such plans. But SIPs are meant to be long-term instruments. If you take three years, five years and so on, there has not been any significant difference in terms of returns between a daily SIP and a monthly SIP," ET quoted Vidya Bala, Head of Mutual Fund Research at FundsIndia, as saying.

"It only gives psychological comfort in the short term to people who think the market is too volatile. So they put money every single day," she said.

Dhiraj Relli, Managing Director & CEO, HDFC Securities, said, "Daily SIPs allow investors to have better control over market volatility. By investing on a daily basis, investors will be able to utilise their money appropriately."

HDFC Securities launched a daily SIP plan in partnership with the BSE last month.

LIC MF has started the service with five equity schemes, which include LIC MF Equity Fund, LIC MF Growth Fund, LIC MF Midcap Fund, LIC MF Infrastructure Fund and LIC MF Index Fund and two hybrid schemes i.e LIC MF Balanced Fund and LIC MF Monthly Income Plan.

According to the ET report, LIC MF has a SIP inflow of Rs 23 crore a month and it expects the number to go up to Rs 30 crore after the launch of this new product.

There has been a 56% surge in inflows to mutual funds through the SIP route this financial year, Rajesh Patwardhan, Chief Marketing Officer, LIC Mutual Fund told ET.

“Mutual fund SIP is gaining recognition among investors, as they encourage investing in a disciplined manner without worrying about market volatility and timing the market," he said.

While SIP is a better route to invest in equity, daily SIPs will further help beat market volatility and benefit investors from rupee cost averaging, he added.