SIP closures more pronounced in direct space amid equity market fall

Active SIP accounts decline by nearly a million in January, even as regular plan SIP count rises by 0.4 million

Active systematic investment plan (SIP) accounts in direct plan mutual fund (MF) schemes declined by nearly one million in January, amid the equity market correction and re-evaluation of investor accounts by the industry.

 

This decline also reflects a shift in investor behaviour amid a change in market sentiment.

 

Direct plan offerings of MFs cater to investors who invest directly, mostly through online investment platforms.

 

Meanwhile, regular plans are distributed by intermediaries like banks and agents and include commissions for their services.

 

As of January-end, there were 39.2 million active SIP accounts on the direct side, down 0.9 million from the December 2024 tally of 40.1 million, shows industry data.

 

In comparison, the regular plan SIP count went up by 0.4 million to 63.5 million in January 2025.

 

SIP closures, both in direct and regular space, had seen a sharp surge in January. However, the closures were more pronounced on the direct side. 

“Active plans of MF schemes were adding SIP accounts at a record pace in the past one year. With the equity market dynamics changing, such investors may be reviewing their portfolios, leading to higher SIP stoppages,” said Aashish P Somaiyaa, chief executive officer (CEO) at WhiteOak Capital Asset Management.

 

The one-year SIP returns of equity schemes, barring a few, have turned negative amid a sharp fall in the share prices during the last four months.

 

The MF industry has around 10 million unique investors who have started investing in the last one year. These investors constitute close to one-fifth of the total MF investor count.

 

SIP account openings had seen a sharp surge in the first half of 2024, boosted by the equity market rally and record number of equity fund launches.

 

SIP account additions on the direct side have outpaced the net openings in regular plans for several months last year. However, the trend has reversed in recent months with SIP account additions registering a decline.

 

The SIP tally, including both direct and regular, has been on a decline for the past three months.

 

While SIP accounts declined by 0.5 million in January 2025, the net additions were close to 1 million in November and December each.

 

During the previous six months, the industry had added 2.4 million accounts on an average, in a month.

 

According to the Association of Mutual Funds in India (Amfi), net decline in SIP accounts in January can also be attributed to reconciliation among exchanges and registrar and transfer agents. The exercise led to removal of 2.5 million accounts.

 

In a media call earlier this month, the association had said the industry will focus on investor education to prevent premature exit by investors.

 

“We will continue to educate investors on the importance of staying invested through volatile phases, focusing on a disciplined, long-term approach to wealth creation,” Venkat N Chalasani, chief executive of Amfi, had said.