Chhoti SIPs gain scale but face high exit rush amid West Asia conflict

High market volatility, strained household budgets likely factors

The low-ticket systematic investment plan (SIP) segment, or the ₹250 investment options known as ‘Chhoti SIP’, is expanding rapidly but continues to face elevated discontinuation rates, reflecting the challenges first-time investors face in sustaining their investments, as the West Asia conflict affects household budgets. 

The total number of SIPs under the Chhoti SIP scheme rose to 322,000 by June 2026, from 197,000 in April 2025, according to data from the Securities and Exchange Board of India (Sebi). 

However, discontinuance remains elevated, with more than 26,000 SIPs closed in May this year. Since September 2025, monthly additions have averaged around 28,000, while closures have averaged about 20,000. 

Industry participants and the Association of Mutual Funds in India (Amfi) said first-time investors are typically more vulnerable to market volatility, which has remained elevated over the past year because of the West Asia conflict and other geopolitical tensions. The conflict has also driven up inflation, thereby impacting household budgets. 

Sebi introduced the Chhoti SIP scheme in February 2025, with cost subsidies to encourage participation. According to the regulator’s estimates, ₹250 SIPs would break even for fund houses within two years due to subsidised onboarding, know-your-customer (KYC) compliance, payment gateway charges, and other related costs. The subsidised rates are available for an investor’s first three ₹250 SIP registrations. 

While stoppages across the broader SIP ecosystem also remain high — at 95 per cent in May — reflecting SIP maturities and discontinuations, the churn in Chhoti SIPs is notable because the scheme was launched only about a year ago and the cost subsidies are available to first-time investors. 

For SBI Mutual Fund, the first asset manager to launch the ₹250 ‘Jan Nivesh SIP’, the discontinuance rate stood at 35.64 per cent as of April 1, 2026. The fund house recorded 81,570 Jan Nivesh SIP registrations in FY26, of which 29,072 had ceased, according to its red herring prospectus. “Due to the low ticket size, daily investment frequency and first-time investor profile of the Jan Nivesh SIP, this product may experience higher discontinuance rates as compared to our other SIP products,” noted the prospectus. 

Venkat Chalasani, chief executive of Amfi, said that while some SIPs are being discontinued, new registrations continue to outpace closures. 

“Chhoti SIP investors are often first-time investors with limited experience of market cycles. Periods of heightened volatility, driven by global events such as tariffs and geopolitical tensions over the past year and a half, can make some investors pause or discontinue their investments. That is why the pace of adoption has been gradual,” Chalasani said. 

He added that several fund houses also offer small-ticket SIPs starting from as little as ₹50. When these are considered alongside Chhoti SIPs, the combined assets under management (AUM) are already around ₹2,000 crore, reflecting growing acceptance of small-ticket investing. 

Despite the churn, AUM have nearly doubled. The scheme’s AUM increased to ₹184.2 crore by May 2026 from ₹96.74 crore in April 2025, suggesting net inflows have remained positive and investor stickiness, while under pressure, is gradually improving. 

“Going forward, investor education and continued hand-holding will be crucial to help first-time investors understand the importance of goal-based investing and staying invested through market cycles,” Chalasani said, adding that the broader SIP ecosystem has continued to record monthly growth. 

Encouragingly, discontinuance trends are showing signs of moderation in absolute terms. Monthly discontinuations declined to 26,000 in May 2026 from 34,000 in April 2025, even as the overall investor base expanded. 

“Certain economic factors also come into play when it comes to low-ticket investing. For instance, someone who earns daily through an autorickshaw may face higher fuel and operating costs, reducing the amount available for investment,” said another industry executive. 

Industry participants said retention ratios are likely to improve as the product matures and first-time investors become more familiar with investing and market cycles. But some players also pointed to KYC-related onboarding challenges in bringing uninitiated investors into the segment. 

“Higher discontinuation isn't a structural flaw in the low-ticket format itself; it reflects the fact that this segment concentrates less to inexperienced, under/unadvised investors precisely when markets have been testing everyone's patience,” said Manish Kothari, cofounder of ZFunds, an Amfi-registered MF and SIF distributor.