SIP stoppage ratio hits an all-time record high of 122% in February

SIPs have been in focus over the last few months as the mutual fund industry has doubled down on its messaging advising investors to stay long in SIPs despite the market volatility and corrections

The SIP stoppage ratio has hit a record high of 122 percent in February, clearly indicating that the share of discontinued or expired SIPs are increasing at a faster pace compared to new SIP registrations.

Data from the Association of Mutual Funds in India (AMFI), shows that the SIP stoppage ratio has been steadily rising over the last one year. Before jumping to 122 percent in February, it was 109 percent in January. The metric was pegged at a little under 83 percent in December.

SIP stoppage ratio reflects the percentage of discontinued or expired SIPs relative to new registrations. Meanwhile, SIP inflows for the month of February were Rs 25,999 crore, a slight decline from Rs 26,400 crore in January.

Further, the number of active accounts stood at 44.56 lakh in February, while the number of discontinued accounts rose to 54.70 lakh.

Pravin Kulkarni, founder of UPInvest, a mutual fund distributor, and international wealth manager says that while there has been a noticeable increase in people pausing or deferring their SIPs, the biggest casualty have been SIPs being made through the direct route as no one was hand holding them during this period.

Going forward, he believes that the trend will eventually reverse when the market begins to recover. "We have continued to receive some inquiries, albeit fewer than before, but we always approach clients by linking SIPs with their long-term financial goals. Thanks to that, the clients know that continuing those SIPs, irrespective of market conditions, is the best way forward," he said.

According to Venkat Chalasani, chief executive at AMFI, the increase in number of discontinued accounts is not solely reflective of the current month, as it includes adjustments and a clean-up process that could not be completed in January and was carried out in February instead.

Additionally, some discontinued accounts are those that were closed in compliance with SEBI guidelines but were not accounted for in January and are now being reflected in the latest data.

Over the past six months, both benchmark indices have been under pressure with the Nifty 50 down 11 percent and BSE Sensex shedding around 10 percent. SIPs have been in focus over the last few months as the mutual fund industry has doubled down on its messaging advising investors to stay long in SIPs despite the market volatility and corrections, especially in the mid and small cap space.

Meanwhile, Chalasani further said that the dip is in line with the usual trend seen in February as the shorter month typically results in lower inflows. “This pattern has been consistent over the past two to three years, " he said adding that the overall assets under SIP stood at Rs 12.38 lakh crore, down from Rs 13.2 lakh crore, primarily due to mark-to-market losses.

On the other hand  Amol Joshi, Founder of PlanRupee Investment Services is more optimistic. He explains that investors are actively rotating between different scheme categories rather than exiting the market. Those previously invested in mid- and small-cap funds are shifting towards flexi-cap or large-cap funds, while others are moving from flexi-cap and multi-cap schemes to balanced advantage or other equity categories. "Despite SIP stoppages SIP inflow numbers are steady near 26,000 crores. Since the rupee inflow remains stable, it's clear that investors are managing their portfolios more actively rather than exiting," he said.

Technology has played a key role in making portfolio adjustments easier. "Earlier, setting up an SIP took 15 days to a month; now, it's done with a click. This has enabled investors to be more agile in portfolio management," he added.

Despite market volatility, there are no signs of large-scale investor exits. "SIP data remains stable, and while equity net inflows were slightly lower, they still came in excess of Rs 29,000 crore. This is not indicative of mass exits rather a minor dip," Joshi said adding that mutual fund investors typically follow a goal-based approach rather than a trading mindset. “If someone has a financial goal set for 2030, they are unlikely to exit due to short-term volatility,” he said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.