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

  • India Infoline News Service
  • 11 Jan , 2022
  • 2:23 PM
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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Mar-22 SIP flows at all-time high of Rs12,328 crore

  • India Infoline News Service
  • 11 Apr , 2022
  • 8:43 AM
The SIP flows data for FY21-22 has been released by AMFI and it is a record of sorts. In the recently concluded fiscal year 2021-22, SIP flows touched Rs124,566cr for the full year. That exhibits a steep growth over previous highs. For instance, the SIP flows of Rs124,556cr in FY22 is 29.65% higher than the total SIP flows recorded in the previous fiscal year FY21. Even if you compare with FY20, when SIP flows had touched Rs1 trillion for the first time, the FY22 SIP flows are still 24.46% higher. In short, the SIP story in FY22 is a quantum leap.

Since Sep-21, the SIP flows were consistently above Rs10,000cr per month and since Nov-21 it has been above Rs11,000cr a month. From SIP flows of Rs11,005cr in Nov-21 it picked up to Rs11,305cr in Dec-21 and then to Rs11,517cr in Jan-22. In Feb-22 SIP flows tapered to Rs11,438cr, but bounced back to a record of Rs.12,328cr in Mar-22. What is actually remarkable is that these SIP flows have sustained through some serious macroeconomic and geopolitical challenges like the Ukraine war, Fed hawkishness, rampant inflation, persistent FPI selling etc. SIP flows are a good barometer of retail conviction in equities.

SIP flows in FY22 scale a record Rs124,566cr

We now have the complete annual SIP flows for the last 6 years in succession. When FY22 started, we had projected full fiscal FY22 SIP flows to better the Rs1 trillion mark. That has been improved upon by a huge margin, thanks to the persistent pick up in SIP flows since Sep-21. Overall SIP flows for FY22 were 24.5% higher than the previous record year 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 risen steadily over last 6 years. For instance, 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. For FY22, the AMST is at an impressive Rs10,381cr. In the last 6 years, there have been 3 major shifts in the AMST. First was the leap from FY17 to FY18 and then came the leap from FY18 to FY19. However, the AMST more or less stagnated between FY19 and FY21. The SIP AMST in FY22 has once again seen a quantum jump and that is the big story for FY22.

For now, there are 2 key takeaways that emerge. Firstly, investors are increasingly looking at SIPs as a product to plan financial goals rather than an alternative to lump-sum investing. Secondly, the big lesson from the pandemic was that, those who persisted with SIPs were laughing all the way to the bank, compared to those who redeemed their mutual fund units for instant liquidity. That brings us to the more important question; can we rely on the SIP flow data alone? It shows quantum of funds coming into SIPs but not the retail spread of SIPs, which is a more sustainable measure. For that, we look at the SIP folios data.

A clearer picture through SIP folios and SIP AUM

Why have SIPs taken off so aggressively in India. Clearly, investors are now looking at SIPs as the best way to lock in long term risk investments. First-time investors prefer the SIP route to equities, which is simpler and generally more lucrative than an active investment strategy. The month of Mar-22 marked the 7th consecutive month that the Rs10,000 crore SIP mark was comfortably breached and the 5th consecutive month of SIP flow staying above Rs11,000cr, as well as the first month when SIP flows were above Rs12,000cr. Now, we turn to whether the growth in SIP flows is  supported by growth in SIP folios and SIP AUM. That is a much better litmus test of the retail spread of the SIP story.

But, first the SIP folio story. The number of SIP folios increased from 517.29 lakhs in Feb-22 to 527.73 lakhs in Mar-22; a monthly net accretion of 10.44 lakh SIP folios or 2.02%. How has the SIP folio growth been over a 1 year period. Between Mar-21 and Mar-22, the number of SIP folios grew by 41.66% from 372.54 lakh folios to 527.73 lakh folios.

Let us now turn to the SIP AUM story. The SIP AUM (assets under management) increased from Rs549,889cr to Rs576,358cr. This rise of  4.81% offsets the sharp fall in SIP AUM in the previous month and brings the SIP AUM back to the Jan-22 levels. How did SIP AUM grow over last one year? The SIP AUM grew from Rs427,916cr in Mar-21 to Rs576,358cr in Mar-22, an annual AUM accretion of 34.69%. As of Mar-22, SIP is one-third of retail MF AUM.

SIP stoppage ratio edges higher for 5th month in succession

SIP stoppage ratio is an important metrics that represents the ratio of SIP accounts discontinued in a specified period as a ratio of new SIP accounts opened. Lower this ratio, the better it is. This indicates the level of retention of SIP investors. Between Oct-21 and Mar-22, the SIP stoppage ratio spiked from 35.67% to 50.10%. This can be attributed to high levels of anxiety in markets. That is not surprising considering the war situation in Ukraine, spike in crude prices, the market crash, Fed hawkishness and relentless FII selling.

Generally, annualized SIP stoppage ratio of 40% to 45% is acceptable, and currently it stands at 41.74% for FY22. But the sharp spike in this ratio in the last 5 months is a concern. We have seen in 2020 and 2021 that the longer market uncertainty lasts, more people exit SIPs. In FY20, SIP stoppage ratio was 57.84% but spiked to 60.88% in FY21, amidst COVID-19 stress. In FY22 median SIP stoppage ratio is just 41.74%, but it is time to be cautious.

As we commence a new fiscal year, what could be the likely numbers India should expect in terms of SIP flows and AUM. We will leave out the AUM part, since it is a derivative product of folios, flows and market movements. However, if the sustained penetration into smaller cities can improve the monthly SIP flows to Rs20,000cr by end of FY23, that would certainly be a job well done.

January 2023 SIP flows scale Rs13,856 crore

  • 10 Feb , 2023
  • 9:37 AM
  • The SIP flow data for January 2023 released by AMFI was the 6th consecutive month of consistently higher SIP flows.

It may be recollected that in FY22, SIP flows touched a record level of Rs124,566 crore for the full year. If you go by the early estimates for the first 10 months up to September 2022, FY23 SIP flows promise to be closer to Rs153,612 crore or 23.3% higher on a yoy basis. 

The monthly SIP flows have been consistently trending higher over the last one year, with the monthly SIP flow up 20.31% on a yoy basis from Rs11,517 crore to Rs13,856 crore. This has been matched by a concomitant rise in the SIP folios as we shall see later. But first a quick detour into how to make SIPs work best for you.

A quick detour: 5 ways to make SIPs work best for you

It is just not enough to start a systematic investment plan (SIP). You have to put in some basic effort to ensure that the SIPs work best for you. Here is a quick primer.

  1. Start the SIP as early as possible. SIPs are based on the power of compounding, which means time matters more than timing. The longer you stay invested, the more likely you are to make money work harder for you. That is when compounding works best.

     
  2. SIPs must be pegged to financial goals, otherwise the SIP is likely to become an aimless investment. Either you can have multiple SIPs mapped to a single goal or you can have a single SIP that is mapped to multiple goals. Both are good enough.

     
  3. Ideally, keep your SIPs linked to diversified funds or at best you can go for a multi-cap fund. When you are using SIPs to meet long term goals, it is best to avoid sectoral funds, thematic funds or dividend yield funds as they can be more cyclical in nature.

     
  4. SIP should have an auto step-up facility. It is not enough to start a SIP and forget about it. The idea is to ensure that the SIP amount also grows simultaneously with your income levels, so that your savings are at an optimum level.

     
  5. Finally, SIP amount must never be decided by investing the surplus amounts. Instead, the focus should be on setting goals and squeezing savings out of your income. That is when SIPs genuinely build wealth.

FY23 already the biggest year in SIP collections

At Rs128,010 crore, FY23 is already the biggest year in SIP collections with 2 more months to go. If we look at the underlying trend, SIPs have been consistently growing, except for a brief lull in FY21 amidst the pandemic. The figure for FY23 is annualized, but with 10 months gone, you can safely assume that the bar is reflective of the final picture of FY23. In the last 2 years, annual SIP flows are up 59.9% while compared to FY22, the SIP flows are likely to be up by 23.3% on a yoy basis over FY22.

An interesting metrics to evaluate the SIP intensity is the average monthly SIP ticket (AMST). This has been steadily increasing over the last 6 years, as illustrated in the table below.

Financial Year

Average Monthly
SIP Ticket (AMST)

FY 2016-17Rs3,660 crore
FY 2017-18Rs5,600 crore
FY 2018-19Rs7,725 crore
FY 2019-20Rs8,340 crore
FY 2020-21Rs8,007 crore
FY 2021-22Rs10,381 crore
FY 2022-23Rs12,801 crore

The big takeaway from the above data is that the recovery post COVID has been really strong and decisive and it has also been unrelenting. Despite headwinds like inflation, central bank hawkishness and the fears of recession; SIP flows have been consistently building up in FY23. That can also be largely attributed to the surge in millennial participation in these systematic investment plans.

SIP folio, SIP AUM and the retail story for December 2022

SIP flows in value terms can be enticing and simple, but it can often by misleading too. Here is the reason for that. SIP flows do not capture the retail intensity as they are averages. That job is done quite effectively by SIP folios and SIP AUM. Both, SIP folios and SIP AUM can be used as proxies for assessing retail spread, although SIP folios (MF accounts unique to an AMC) can be considered to be more reliable as it is pure volume numbers.

How did the SIP folio growth story pan out in January 2023? The number of SIP folios increased from 612.43 lakhs in December 2022 to 621.63 lakhs in January 2023. That is monthly net accretion of 9.20 lakh SIP folios or 1.5%. The folio growth reflects retail intensity and currently, SIP folio data for FY23 is showing a lot of retail intensity!

What about SIP AUMs? If you look at FY23, between April 2022 and January 2023, the SIP AUM has increased sharply from Rs578,086 crore to Rs673,775 crore; a growth of 16.55%. However, despite smart folio numbers, the SIP AUM (assets under management) has been consistently falling from the peaks of November 2022. This can be attributed to the sharp fall in equity indices in December 2022 and in January 2023 amidst heavy FPI selling in Indian equities. FPIs had sold nearly $3.54 billion in Indian equities in January 2023.

SIP stoppage ratio remains elevated in January 2023

SIP stoppage ratio is the ratio of SIP accounts discontinued in a specified period to the new SIP accounts opened. It shows the stickiness or the lack of it among investors in mutual fund SIPs. Lower this ratio, the better it is since it is indicative of the higher retention of SIP investors. For FY20, the SIP stoppage ratio for the full year was 57.84% while for FY21 it was 60.88%. 

There was a reason for the same. The high SIP stoppage ratios in FY20 and FY21 can be attributed to the COVID based uncertainty and withdrawals for cash flow emergencies. Later in FY22 the SIP stoppage ratio fell to 41.74%. Ideally, SIP stoppage ratio in the range of 40% to 45% is considered to be tolerable and also acceptable. In FY23 SIP stoppage ratio for the month of January 2023 tapered to 59.38% compared to 66.22% in December 2022.

Let is also look at the cumulative SIP stoppage ratio for the first 10 months of FY23, it stands higher at 55.10%. That is fairly high considering the last year data, but the uncertainty and headwinds are much higher in the current year. So, some amount of caution is a good idea at this juncture. The immediate priority should be to bring down the SIP stoppage ratio to fall well below 50% by the end of March 2023.

However, the real story of SIPs may have just about begun in India. For an economy with $3.2 trillion of GDP and moving towards $5 trillion in next 7 years, these SIP collections are just the tip of the iceberg. The potential is certainly huge and that will eventually reflect in the SIP flows.

 

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  • 11 April, 2022 |
  • 7:44 AM

In Feb-22 SIP flows tapered to Rs11,438cr, but bounced back to a record of Rs.12,328cr in Mar-22.

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