SIP stoppage ratio at 27-month high as investors shut accounts aggressively

The SIP stoppage ratio rose to a 27-month high of 0.68 in February, data from mutual fund industry body Association of Mutual Funds in India (AMFI) showed on Thursday. The SIP ratio determines the proportion of SIP accounts closeed to those opened.

Simply put, the latest data indicates that a majority of people are shutting their SIP accounts on Dalal Street, amid shrinking returns in the past one year.

In February, the Sensex fell over one per cent and the Nifty50 two per cent — a third straight month of falls for both headline indices.

Over the previous 12 months, an average of over 9.2 lakh SIP accounts were added each month. The figure for February came in at 6.6 lakh accounts, an eight-month low. Meanwhile, 14.3 lakh SIP accounts were shut in February — a multi-year high on a rolling three-month basis. This crossed 13 lakh account closings for the third month in a row. As many as 11 lakh accounts were cancelled in February 2022.

According to market experts, the reason for account closing could be the trailing equity market returns.

In the last five months, the mutual fund account stopping ratio increased from 0.52 in October 2022 to 0.68 in February 2023. While in January 2023, it was 0.59; in December 2022, it was 0.66 and in November 2022, it stood at 0.48.

Simultaneously, new accounts addition increased to 6.64 lakh in February 2023 from 9.53 lakh in October 2022, and 9.19 lakh, 7.86 lakh, and 11.27 lakh accounts were added in January 2023, December 2022, and November 2022 respectively.

Meanwhile, according to the AMFI website, Indian Mutual Funds have currently about 6.28 crore SIP accounts through which investors regularly invest in Indian Mutual Fund schemes. The total amount collected through SIP during February 2023 was Rs 13,686 crore.

SIP is a highly handy way to invest in mutual funds using standing instructions to debit your bank account every month. It is becoming more and more popular among Indian MF investors as it facilitates rupee cost averaging and disciplined investment without having to worry about market volatility or timing the market.