SIP Closures Experience a 7.4% Increase in May Despite Strong Inflows
The number of systematic investment plan (SIP) accounts being discontinued rose by 7.4% month-on-month to 14.19 lakh in May, despite the significant inflow of funds into mutual funds through this investment route. Conversely, the number of new SIP registrations increased to 24.7 lakh last month from 19.56 lakh in April, indicating over 5 lakh fresh registrations, according to data from the Association of Mutual Funds in India (AMFI).
The higher number of SIP registrations compared to discontinuations reflects investors’ continued confidence in this investment method, suggested DP Singh, Deputy MD and CBO at SBI Mutual Fund. He further added that the ease of online cancellation may have contributed to this trend.
Meanwhile, investors continue to channel their funds into mutual funds, with contributions through SIPs reaching a new high of Rs 14,749 crore in May, following a slight dip to Rs 13,728 crore in April. In March, it stood at Rs 14,276 crore. This robust inflow has resulted in the SIP assets under management rising by 5% to Rs 7.53 lakh crore in May, compared to Rs 7.17 lakh crore in April.
The increase in SIP inflows alongside higher cancellations suggests that new investors are investing more money than the average ticket size. The data reveals that the number of discontinued or matured SIP accounts rose from 13.21 lakh in April to 14.19 lakh in May.
In the overall context, 1.43 crore SIPs were discontinued or matured in the fiscal year 2022-23, higher than the 1.11 crore SIPs in 2021-22. However, the number of SIP registrations was also higher during these periods.
Additionally, the assets under management of equity mutual funds saw a 4.5% month-on-month increase to reach Rs 16.56 lakh crore in May, driven by a surge in market indices and sales of equity schemes.
The industry witnessed a 21% month-on-month increase in equity scheme sales to Rs 34,100 crore, while redemptions rose nearly 37% to Rs 31,100 crore. Consequently, net inflows dropped to a low of Rs 3,240 crore in May, marking the second consecutive month of decline in inflows.
According to the data, the asset base of equity mutual funds, including equity-linked saving schemes (ELSS), rose to Rs 16.56 lakh crore in May from Rs 15.84 lakh crore in April. This growth was supported by the NSE’s benchmark index Nifty, which increased by 2.6% to reach 18,534 in May. Year-to-date, the Nifty has climbed by 3.4%.
In terms of sector allocation, mutual funds showed interest in NBFCs (non-banking finance companies), technology, automobiles, consumer goods, retail, and insurance, leading to a month-on-month increase in their weights, as per a report by Motilal Oswal Financial Services. On the other hand, private banks, PSU banks, utilities, oil and gas, metals, and media saw a month-on-month moderation in their weights.
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