Enhanced returns underpin systematic investment plan openings, shows data

The recent surge in systematic investment plan (SIP) account additions has significantly reduced the SIP stoppage ratio, which peaked at 0.68 in February, reaching its highest level in over two years.

Since June, the ratio has consistently remained below 0.56, largely due to the attractive returns generated by most equity schemes.

The SIP stoppage ratio measures the percentage of SIP accounts closed or matured in comparison to new account additions. A lower SIP closure ratio indicates higher retention of SIP investors, which is positive for the industry.

According to data from the Association of Mutual Funds in India, the mutual fund (MF) industry has witnessed the addition of over 3 million new SIP accounts in the past three months. Simultaneously, discontinuations have ranged from 1.8 to 2.1 million.

The uptick in new SIP account openings can be attributed to the improved performance of MFs in the returns chart. These positive returns followed a post-March rally in the equity market. In the first six months of 2023-24, the National Stock Exchange Nifty gained over 13 per cent, while the Nifty Midcap 100 and Nifty Smallcap 100 surged by 35 per cent and 42 per cent, respectively.

This increase in new account openings has also bolstered SIP flows, with monthly gross SIP flows exceeding the Rs 16,000 mark for the first time in September.

MF folio data indicates that smallcap funds have been the primary attraction for investors during the current financial year (2023-24). The category has witnessed the addition of over 3.7 million folios during this period, in contrast to just 74,400 in the case of largecap funds.