SIP closures reveal divergent trends among B30 direct, regular investors

A/c closures of B-30 SIPs on 'direct' side 2.6x higher than regular plans

The systematic investment plan (SIP) data for the first five months of 2025 highlights distinct investor behaviour based on location and investment mode.

 

In smaller towns and rural areas, referred to as B-30 in mutual fund (MF) terminology, SIP closures in direct plans were 2.6 times higher than in regular plans, despite the latter having a larger account base. MFs offer two variants: direct plans, which are commission-free and accessed through online platforms, and regular plans, which include commissions and are sold by banks or distributors.

 

At the end of May, there were 19.5 million B-30 direct plan accounts, down 19 per cent compared to 24.1 million accounts at the end of December 2024. In the same period, regular plan B-30 accounts declined just 6 per cent to 30.3 million.

 

Experts attribute this disparity to differing objectives between do-it-yourself (DIY) and regular plan investors in B-30 regions.

 

"We have noticed that the fund selection process for DIY investors is vastly different from a regular plan investor, who comes with a distributor or an advisor. DIY investors look at highest performing funds with limited understanding of volatility/risk that some of these funds might carry. A lot of these funds are niche thematic or sectoral strategies that have very long cycles," said Manish Kothari, chief executive officer (CEO) & cofounder, Zfunds. 

 

MF distributors are instrumental in helping regular plan investors develop the commitment and discipline necessary to stay invested for 10-15 year, he added.

 

While the trend was similar in the top-30 (T-30) cities, the difference was not as stark. T-30 direct accounts shrunk by 21 per cent during the five-month period while T-30 regular plan accounts were down 9 per cent.

 

Overall, the closures were comparatively lower in B-30 compared to T-30. While B-30 SIP accounts declined 11 per cent, T-30 accounts shrunk 13 per cent.

 

B-30 SIPs also managed to grow their asset share marginally from 33.8 per cent to 34.2 per cent, with the assets under management (AUM) surging past the ₹5 trillion mark for the first time in May 2025.

 

To be sure, the SIP closure data is only indicative of the investor behaviour given that a significant chunk of the closures is a result of the reconciliation exercise undertaken by asset management companies (AMCs) in the first four months of 2025.