Bulwark against closure storm: SIPs ride out the withdrawal gust

Despite a record number of account closures, redemptions from mutual fund (MF) systematic investment plan (SIP) accounts only slightly exceeded the average of the previous six months.
 

Investors withdrew Rs 11,678 crore from SIP accounts last month, compared to an average of Rs 10,436 crore in the preceding six months. Adjusted for these redemptions, net SIP inflows in May totalled Rs 9,226 crore, which represents 44 per cent of the gross SIP inflows amounting to Rs 20,904 crore, according to data from Amfi.
 

The net SIP data lends credence to the view that the sharp increase in SIP account closures in May was primarily due to inactive accounts being closed. SIP account closures, averaging 1.9 million in 2023-24, rose to 3.3 million in April 2024 and further to 4.4 million in May. This follows a directive from the Securities and Exchange Board of India requiring fund houses to close SIP accounts after three consecutive failed debit attempts. Overall, investors have injected a net of Rs 43,435 crore into MF schemes via SIPs in the first five months of calendar year 2024, compared to Rs 36,121 crore in the same period last year. This surge in inflows through SIPs and lump sum investments has resulted in record deployment of MFs in the equity market over the past three months, with MFs purchasing equities worth Rs 46,666 crore in May.