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Halting SIPs due to market dip? SIP stoppage ratio surges to record 122% in February, up from 109% in Jan

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Halting SIPs due to market dip? SIP stoppage ratio surges to record 122% in February, up from 109% in Jan

In February, the SIP cancellation ratio surged to 122%, indicating a higher number of cancellations than registrations. This significant increase can be noted when comparing the ratios from the previous three months: 79% in November 2024, 83% in December 2024, and 109% in January 2025.

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The New SIP registrations in February was at 44.56 lakh. Besides, 54.7 lakh SIPs were discontinued.

The New SIP registrations in February was at 44.56 lakh. Besides, 54.7 lakh SIPs were discontinued.

The Systematic Investment Plan (SIP) stoppage ratio has reached an unprecedented 122% in February 2025, marking a slowdown in the mutual fund sector. In February, the SIP cancellation ratio surged to 122%, indicating a higher number of cancellations than registrations. This significant increase can be noted when comparing the ratios from the previous three months: 79% in November 2024, 83% in December 2024, and 109% in January 2025.

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The number of discontinued accounts, 54.70 lakh, exceeded the 44.56 lakh active accounts as reported for the month. Such a stark rise in the ratio is indicative of underlying challenges faced by the investment community, even as mutual fund companies actively promote the benefits of continuing SIPs during times of market fluctuation.

Dip in smallcap funds

The key insight from the February data was the decrease in inflows for small cap funds. In comparison to the 3-month average, inflows to this fund dropped by 23%. January saw inflows at Rs 5,147 crore, which decreased by 35% to Rs 3,406 crore in February. Similarly, midcap fund inflows decreased by 34% month-on-month to Rs 3,722 crore from Rs 5,720 crore in January.

Both midcap and small cap stocks experienced significant downward pressure in February, with the BSE Small Cap Index dropping by 21% and the BSE Midcap Index falling by 16% in 2025. Consequently, this has resulted in a noticeable decrease in SIPs and redemptions in many of these mid and small cap funds as investors react to the market conditions.

Decline in Equity mutual fund inflows

Mutual fund net inflows plummeted by approximately 79% in February, primarily due to continued sell-offs in the domestic equity market. The key indices Nifty and Sensex experienced a decline of about 5% during the month, resulting in a significant 26% decrease in equity mutual fund inflows to Rs 29,303 crore in February, down from Rs 39,688 crore in the previous month.

In January, there was also a slight decrease in equity mutual fund inflows of 3.6% month-on-month. This marks the second consecutive month of decline in equity mutual fund inflows.

Staying invested with SIPs

The SIP concept has historically been a cornerstone of the mutual fund industry, appealing to retail investors looking for a structured savings mechanism. February's data signals a possible shift in investor sentiment, as discontinuation figures surpass active ones—a situation that contrasts with the previously stable trajectory of SIP accounts. It reflects the current market volatility, pushing investors to possibly reassess their financial strategies, despite the longstanding trust in SIPs.

Efforts by the mutual fund industry to encourage investors to maintain their SIPs, despite market volatility, have been comprehensive in recent months. The industry has repeatedly emphasised the long-term benefits of SIPs, suggesting that they offer a steady approach to wealth accumulation over time, capable of weathering short-term market corrections.

Suranjana Borthakur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India) highlighted that, “The SIP inflows have come down. I believe investors should continue their SIP flows as it is a great time to accumulate units. Inflows in most equity funds have also dipped, except in the focused fund category. Sectoral funds which saw disproportionately high inflows in previous months, saw flows coming down to around to Rs 5,700 crore in spite of seven NFOs in the category which ended up garnering somewhere around Rs 2,000 crore. Overall, NFO momentum has continued 29 new fund launches, collecting somewhere around 4,000 crores.”

While mutual fund companies continue to advocate for the resilience of SIPs, the February figures could have broader implications across the industry. This development may prompt a reevaluation of current investor engagement strategies, as fund houses work to rebuild the confidence that has been a hallmark of SIP investments. A strong emphasis on investor education and communication is necessary to navigate the present challenges and foster long-term assurance in these financial plans.

Published on: Mar 13, 2025, 7:35 PM IST

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