For the current year, the strong pickup in inflows from domestic investors has more than offset net outflows from foreign investors, noted Brijesh Ved, head of equities, portfolio management services and offshore advisory with Mumbai-based BNP Paribas Asset Management India Pvt. Ltd. BNP has $1.5 billion in India AUM. The firm declined to break out SIP figures.
Longer term, the habit of making regular infusions into mutual funds could open the door for the provision of retirement savings for a growing portion of India's population.
Mr. Sikka said the focus on SIPs at his firm — which has seen its ranks of clients making monthly investments to equity funds swell to 3 million now, with annualized inflows of $1.5 billion, from 2.1 million investors a year ago and 1.6 million two years ago — helps promote "the financial inclusion of India, a country which doesn't have a (developed) social security system." About 90% of India's population isn't covered by a pension safety net, noted Mr. Sikka.
A recent decision by India's largest pension scheme, the $140 billion Employees' Provident Fund Organization, to start investing 15% of its incremental inflows in equity exchange-traded funds, including Reliance Nippon Life ETFs, is a further signal to the public that "equity is an important asset class for wealth creation," said Mr. Sikka.
While SIPs in recent years thrived in an environment where Indian equities were rallying while real estate and gold prices were weakening, some market watchers see signs that the growing embrace of dollar-cost averaging is more structural than cyclical.
For example, combined inflows into SIPs have held up well in recent months despite a bout of turbulence that saw India's S&P BSE Sensex benchmark index tumble 14% over the span of 60 days through late October.
That suggests considerable resilience and commitment to disciplined investing over the long term, said Navneet Munot, chief investment officer of Mumbai-based SBI Funds Management Private Ltd.
Mr. Munot said SBI's SIP business currently serves roughly 4 million investors, more than double the 1.5 million it was serving two years ago, with monthly flows up to 10 billion rupees — coming out to $1.7 billion a year — from 4 billion rupees two years ago.
The rise of dollar-cost averaging, in predominantly equity-linked products offering fees of between 1% and 2%, could prove a salve for a money management industry where executives say fewer than a quarter of the 44 money managers now registered with the Securities and Exchange Board of India are profitable and the top 10 managers control 80% of industry AUM.
That competitive backdrop has tested the devotion of leading foreign managers to the Indian market.
In May, BlackRock Inc. became the latest foreign money manager to quit the Indian mutual fund market, agreeing to sell the 40% stake it took a decade ago in DSP BlackRock Investment Managers — which had about $13 billion in AUM at the end of 2017 — to its partner, DSP Group.