SIP stoppage ratio climbs to third-highest level ever in November

Market participants believe this is primarily because new investors tend to avoid entering the markets during a volatile phase. Also, a large section of existing investors might not want to commit incremental money through SIP till they see some clarity, they add.

Feroze Azeez, Deputy CEO of Anand Rathi Wealth, however, downplayed concerns over the rising stoppage ratio, highlighting the stark contrast between direct and regular SIPs. He noted that direct SIPs, often facilitated by technology, experience higher discontinuation rates during market turbulence due to limited advisory support. In contrast, regular SIPs, managed by human advisors, contribute significantly to investment volumes and exhibit greater resilience.

He further pointed out that political events, such as India's general election in May and the US election in November, typically lead to a surge in SIP stoppages. Despite these challenges, net equity inflows remain robust, buoyed by strong small-cap investments that signal continued retail investor confidence.

He, however, warned that a sustained drop in SIP registrations and rising discontinuation rates could threaten domestic flows critical to market stability. If this trend persists, it may heighten market volatility, emphasising the need for vigilant monitoring of retail participation in the months ahead, he says.

Few experts suggested the slowing new SIP registration was due to fewer NFOs during the month.

In November, Indian equity markets faced significant pressure due to weak global cues, China's recent economic stimulus measures, and escalating Ukraine-Russia tensions.