SHOULD I HAVE my weekly ₹240 Chana Bhatura at the snack bar? Mungerilal’s stomach growled as his heart said, ‘Cut down on fried foods!’ Buy some petrol for my bike? Take the Metro! As he locked his cramped apartment and left for work, his brain said: Invest! Get into that JanNivesh from SBI Mutual Fund. Just ₹250 a month.

Mungerilal, a clerk, let his dreams take wing.

India’s mutual fund behemoth is swinging low to get more Mungerilals into the stock market via systematic investment plans (SIPs).

How low? Say, ₹250 a month? The usual SIP is ₹1,000 or ₹500 a month. In February, SBI Mutual Fund, India’s largest asset management company (AMC) with ₹11.16 lakh crore under management in December 2024, launched the JanNivesh ₹250 SIP to give the common man a shot at investing without losing his shirt.

Big daddy SBI MF has an extensive distribution network, which includes over 22,500 branches of its government-owned parent, the State Bank of India, India’s largest commercial bank. Following closely are the private sector’s ICICI Prudential Mutual Fund (₹9.01 lakh crore), HDFC Mutual Fund (₹7.93 lakh crore), Nippon India Mutual Fund (₹5.73 lakh crore), and Kotak Mahindra Mutual Fund (₹4.82 lakh crore).

D.P. Singh, Deputy Managing Director and Joint CEO of SBI MF, says, “JanNivesh ₹250 SIP brings us closer to our goal of promoting financial inclusion.”

SBI Funds Management, which runs SBI MF, is a joint venture between SBI and France’s Amundi, one of the world’s Top 10 asset managers. SBI MF has partnered with Paytm and other fintech players to offer an easy entry point into investing.

“This is an important step in our shared vision for a Viksit Bharat, where every citizen has access to wealth-building opportunities,” says Singh, a 31-year veteran of the banking and financial services industry with 25 of those years at SBI MF.

But aren’t the stock markets volatile? The NSE’s Nifty 50 and BSE Sensex are hitting record highs but have been sliding since 2025 began. The gains following the shock of the 2020 Covid-19 pandemic have lost momentum.

Therein lies the logic of SIPs. Ignore yesterday’s market fall and today’s rise. Invest for the long term. SIPs have been around in India for over three decades, starting in 1993 with the ₹5,000 SIP from Kothari Pioneer (later Franklin Templeton).

Financial inclusion

Suresh Soni, CEO of Baroda BNP Paribas Mutual Fund, says SBI’s initiative could democratise mutual fund penetration in India. The ecosystem is in place: digital payments, smartphone apps, and regulators.

SBI MF puts the JanNivesh money in its Balanced Advantage Fund (BAF), which invests in diversified, broad-based funds. BAFs maintain a dynamic equity allocation, with at least 65% in equities, which makes it tax-efficient compared with hybrid debt funds or bank fixed deposits. BAFs keep in touch with both asset classes: equity for acceleration when the road ahead is clear and debt as a brake when potholes appear. Investors ignore risk management during a bull run; they cry for it during market downturns.

Mutual funds often use a long-term strategy that sets proportions for different asset classes based on the investor’s financial goals and balances these allocations periodically.

Vivek Sharma, Investments Head at Estee Advisors, a quant-based investment management and execution services provider, says most dynamic asset allocation funds (DAAFs) and BAFs have outperformed the Nifty over the last year. Even over three years, many of these funds have delivered better returns.

“What truly sets BAFs apart is not just the absolute returns but the stability of those returns,” says Sharma.

Soni says, “Around Covid time, when markets fell sharply and valuations became very attractive, most BAFs raised equity allocations… When valuations became stretched like in late 2021 or mid-last year, equity allocation was brought down to limit the potential downside in the portfolio in case equity markets were to correct.”

According to January 2025 data from the Association of Mutual Funds in India (Amfi), 34 BAFs collectively managed ₹2.82 lakh crore in assets, with 5.09 million investor folios. BAFs accounted for nearly one-fourth of all net inflows into hybrid funds in the last three months.

JanNivesh has plenty of fish to catch: only 3% of India’s population invests in mutual funds.

How NOT to attract first-time investors

Small investors could be overwhelmed by market jargon or getting to grips with Sebi’s regulations, not to mention the language barriers, as exemplified by the Hindi vs Tamil debate.

SBI MF’s website does not help: it uses Roman Hindi to explain what it does. (“SBI Balanced Advantage Fund naye niveshakon ke liye ek accha vikalp hai. Yeh santulit risk-reward ke saath tax mein labhdayak hai aur smart allocation karta hai, jo bazaar ke hisaab se equity aur debt ke beech badalta rehta hai.”) The Roman Hindi translates into some mind-numbing English.

What SBI MF means is, “SBI Balanced Advantage Fund is a good choice for beginners. It helps save on taxes, manages risk well, and smartly moves money between stocks and bonds based on market conditions.”

Mutual funds must do a better job of explaining how regulations safeguard investor money. Investors should focus on choosing a trusted fund, staying informed, and investing consistently rather than trying to wrestle with jargon.

Sanjiv Bajaj, Joint Chairman and MD of Bajaj Capital Ltd, says something should be done about the penalties that kick in when the investor’s bank balance falls below the set minimum. “The regulator or industry should develop a mechanism to minimise these penalties in cases of insufficient balance at the time of SIP payment,” Bajaj says.

Then, investors must appreciate that while small is beautiful, it won’t get them anywhere near their dream house or daughter’s college education or retirement dream. JanNivesh is an entry point: they must increase the amount as they get confident.

Colonel Sanjeev Govila (retired), CEO of Hum Fauji Initiatives, says a ₹250 SIP is unlikely to generate the wealth required for big goals such as retirement, a child’s education, or buying a house.

“Investors should view this as a starting point rather than a complete solution and gradually increase their investment amounts as their income grows,” says Govila, an MTech who is also a Certified Financial Planner.

Retail investors, especially those with limited financial knowledge, tend to react to short-term market fluctuations. They could get scared and stop the SIP.

“The initiative is great for awareness, but financial literacy and discipline matter more than just starting small. The ₹250 SIP is like a gym trial — it gets you started, but you won’t build muscles unless you commit more!” says Govila.

If an investor stops paying the ₹250 SIP after a few months, the money remains in the fund and earns returns till the investor redeems it. But wealth accumulation slows, compounding stops, and the investor could lose money to taxes and any fee for quitting early.

Schemes with small SIPs also face the test of economics: the MF must spend money servicing investors, maintaining records, and complying with regulatory requirements.

Fund houses primarily earn through expense ratios, a small percentage of the total AUM. The fee covers fund management, administrative costs, etc. Since a ₹250 SIP contributes a very small amount to AUM, the revenue generated is small.

The bottom line: SBI MF needs an investor retention strategy. Once it manages to get investors! Many small-town investors prefer bank and post office schemes, as these are closer to home and perceived to be more secure. Mutual funds are often viewed as risky. Government data shows that Indian households are risk-averse and prefer to invest in gold, real estate, or fixed deposits.

Mutual fund managers need more boots on the ground to back up the generic advertisements on television, market their products better, use vernacular content and bank on technology to remove transaction pain points for investors.

Opportunities amidst challenges

If executed well, the ₹250 SIP could revolutionise India’s investment culture, becoming a gateway attracting millions of new investors into the mutual fund ecosystem. According to Amfi, the number of investor accounts or folios increased from 85.3 million in August 2019 to 204.5 million by August 2024. That’s an average of 1.99 million new accounts a month.

Bajaj says the scheme is great for individuals in the unorganised sector and lower-income groups. Just as Chik, later CavinKare, revolutionised the consumer goods market in the late 1980s by selling expensive products such as shampoos in sachets priced at a rupee or two, the ₹250 SIP could open the world of mutual funds.

Sharma says affordability is not the problem for the millions who count their earnings at the end of the day or live from payday to pay day. The issue is cash flow.

“The ₹250 SIP provides an opportunity to start investing without disrupting essential expenses, making wealth creation accessible to those with limited financial flexibility,” says Sharma.

The mutual fund industry will have solved a big problem if it gets the masses into the discipline of investing, starting small and growing up the ladder.