SIP's full cup: Lowest stoppage ratio in over two years, shows data

Even as new systematic investment plan (SIP) account registrations dropped last month, the net SIP account additions came in higher than in January.

The increase in net additions came on the back of an improved SIP stoppage ratio of 42 per cent, the lowest since November 2021.

The SIP stoppage ratio is the number of SIP accounts closed or matured as a percentage of new account additions.

The lower the SIP closure ratio, the better, as it indicates higher retention of SIP investors.

The ratio has eased in the past few months after staying above 50 per cent in the preceding 11 months.

SIP account discontinuation moderated in February, despite the regulator highlighting valuation concerns in the mid and smallcap space.

Mutual fund (MF) schemes predominantly investing in these segments have seen the highest investor demand in the past year.

However, it remains to be seen how the ratio pans out this month, given the sharp spike in volatility.

SIP registrations have shown consistent growth in 2023-24 on the back of the equity bull market.

In the previous two months, investors have registered around 5 million SIP accounts. In the same months of the previous year, registrations were only around 2 million.

However, the discontinuation of SIP accounts has also gone up at a fast pace.

In February, 2.1 million accounts were stopped, compared to 1.4 million in February 2023.

MF executives say that the near-proportionate rise in registration and discontinuation of SIP accounts indicates high churn due to the ease of account opening and withdrawals.