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Dec-21 SIP flows at Rs11,305cr scales an all-time high

Mutual funds SIP flows breached the Rs10,000cr Rubicon in Sep-21 and has held since.

January 11, 2022 2:23 IST | India Infoline News Service
Mutual funds SIP flows breached the Rs10,000cr Rubicon in Sep-21 and has held since. In Oct-21 the monthly SIP flows grew to Rs10,519cr; predominantly retail and predominantly ELSS flows. However, Nov-21 saw a new record at Rs11,005cr and in Dec-21 even that has been taken out at Rs11,305cr. The SIP momentum had been building gradually from May-21 and has not looked back. Here is the SIP story for December 2021.

SIP flows in FY22 now look all set for record levels

In the chart below, data from FY17 to FY21 represents actual yearly SIP  flows while FY22 data is 9-month data annualized. It now looks like the original estimates for FY22 may end up being conservative rather than aggressive. With each passing month, the last SIP graph gets taller and more representative of the FY22 trend. The chart indicates that overall SIP flows for FY22 is likely to be much bigger than the last record year of FY20.

Data Source: AMFI (FY22 data is annualized)

One reliable measure of the SIP flow trend is the average monthly SIP ticket (AMST). This has been steadily rising over last 5 years. For example, the AMST was Rs3,660cr in FY17, Rs5,600cr in FY18, Rs7,725cr in FY19, Rs8,340cr in FY20 and Rs.8,007cr in FY21. After 9 months of FY22, the average monthly SIP ticket stand at Rs9,920cr. That is a quantum leap over earlier years. With Rs11,000cr plus SIP flows for 2 months in succession, it should touch AMST of Rs10,000cr before end of FY22.

While monthly SIP flows are representative, it is more of a value picture. In any retail product, it is volume numbers that count for more than value. Hence we also look at SIP AUM share and SIP folios. These give a more relative and micro picture of SIP trends. For example, the combination of millennial investors, higher risk appetite, falling bond yields and easier access to mutual funds have played a part. One of the important SIP lessons for Indian investors during the pandemic was that; had they just stuck on to their SIP discipline, they would have ended up wealthier. After all, in the rough and tumble of financial markets, time matters a lot more than timing.

SIP folios inch closer to the 5 crore mark in Dec-21

The slope of the SIP flow trendline shows a palpable uptrend. The idea of SIPs gained ground in India in the last one year is due to investors gravitating towards SIPs as the launching pad to markets. The month of Dec-21 marked the 4th consecutive month that the Rs10,000 crore SIP mark was comfortably breached. But has this growth in AUM been supported by aggressive growth in SIP folios and SIP AUM. While folios are AMC level accounts of investors, SIP AUM represents a combination of SIP flows and market cap accretion.

Data Source: AMFI

Let us first turn to the SIP folio story. The number of SIP folios increased from 478.24 lakhs in Nov-21 to 490.79 lakhs in Dec-21; a monthly net accretion of 12.55 lakh SIP folios or 2.62%. During the same period, the SIP AUM (assets under management) increased from Rs546,683cr to Rs565,420cr; an increase of 3.43%. On an average, the SIP folios and the SIP AUM have been building momentum on a consistent basis, month after month.

How has the share of SIP AUM in overall equity fund AUM panned out? As of Oct-21, SIP AUM stood at Rs565,420cr out of an average equity AUM of Rs13,06,384cr, a share of 43.28%. Nearly one-third of retail AUM (as defined by AMFI) is accounted for by SIPs.

SIP stoppage ratio edges higher for second month in succession

SIP stoppage ratio represents the ratio of SIP accounts discontinued in a certain period to the number of SIP accounts opened. Lower this ratio, it indicates greater level of retention of SIP investors. In Dec-21, the SIP stoppage ratio spiked sequentially from 39.91% to 43.13%. This could be due to high level of uncertainty in markets and likely RBI hawkishness.

Data Source: AMFI (# - represents 9-month average)

Generally, SIP stoppage ratio of 40% to 45% is acceptable, so 39.50% in the first 9 months is comfortable by a mile, although a flat to falling stoppage ratio is the ideal situation. In FY20, the SIP stoppage ratio stood at 57.84% but spiked to 60.88% in FY21, due to COVID-19 stress. In FY22 median SIP stoppage ratio remains under 40%, and that is the good news.

Almost at 5 crore folios, but there is a big opportunity still

In Dec-21, The total folios reached 4.91 crore, so we should easily get to 5 crore folios in Jan-22, even at the current rate of monthly accretion. Obviously, these are not the number of investors because most people have multiple folios but the fact remains that retail investors are flocking to SIP as their primary stock market vehicle.

More interesting is the road ahead. Currently, there are over 9 crore registered investors on the stock exchanges and about 30 crore insurance policy holders. If that potential is tapped next, then sky is the limit for channelling retail savings into mutual funds via SIPs.

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