In the last 5 years, there was just one occasion in FY19-20 when total annual SIP collections crossed Rs100,000cr mark. In the current fiscal year 2021-22, SIP flows crossed Rs100,000 crore in the first 10 months itself. That is a clear signal of building SIP momentum among retail mutual fund investors in India.
Since Sep-21, the SIP flows have been consistently above the Rs10,000cr mark each month with calibrated build-up of momentum each month. From SIP flows of Rs11,005 crore in Nov-21 to Rs11,305 crore in Dec-21 and now to Rs11,517 crore in Jan-22, SIP flows have been the real barometer of robust retail participation in mutual funds.
SIP flows in FY22 already the best in just 10 months
In the chart below, data from FY17 to FY21 represents actual yearly SIP flows while FY22 data is 10-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.
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, Rs5,600 crore in FY18, Rs7,725 crore in FY19, Rs8,340 crore in FY20 and Rs.8,007 crore in FY21. After 10 months of FY22, the average monthly SIP ticket stand at Rs10,020 crore. That is a quantum leap over earlier years. The AMST has crossed Rs10,000 crore well before the end of FY22.
While monthly SIP flows are representative, it is more a value picture. In any retail product, it is volume numbers that really matter. SIP folios give a more 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 to the SIP discipline, they would have ended up wealthier. In financial markets, time matters more than timing.
SIP folios finally cross the 5cr folio mark in Jan-22
The idea of SIPs gained has gained ground in India in the last one year due to investors gravitating towards SIPs as the launching pad to markets. Most first-time investors prefer the passive theme of SIPs over active investment scouting. The month of Jan-22 marked the 5th consecutive month that the Rs10,000 crore SIP mark was comfortably breached. The million dollar question is whether 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.
Let us first turn to the SIP folio story. The number of SIP folios increased from 490.79 lakhs in Dec-21 to 504.84 lakhs in Jan-22; a monthly net accretion of 14.05 lakh SIP folios or 2.86%. During the same period, the SIP AUM (assets under management) increased from Rs565,420 crore to Rs576,588 crore; an increase of 1.98%. 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 Jan-22, SIP AUM stood at Rs576,588 crore out of an average equity AUM of Rs13,56,106 crore, a share of 42.52%. Nearly one-third of retail AUM (as defined by AMFI) is accounted for by SIPs.
SIP stoppage ratio edges higher for third month in succession
SIP stoppage ratio is an important metrics that represents the ratio of SIP accounts discontinued in a certain period to the number of SIP accounts opened. Lower this ratio, the better it is. This indicates the level of retention of SIP investors. In the last 2 months between Nov-21 and Jan-22, the SIP stoppage ratio spiked from 39.91% to 47.00%. This could be attributed to high level of anxiety in markets due to the monetary flux.
Generally, SIP stoppage ratio of 40% to 45% is acceptable, and currently it is at 40.39% in the first 10 months. While the numbers are still in control, this is one area that shows some amount of panic building in among SIP investors. As we have seen in 2020 and 2021, the longer the market uncertainty lasts, more people tend to 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 just crossed 40%, and that is a cautionary signal.
Five crore folios done, what next?
In Jan-22, total mutual folios crossed 5cr mark for the first time. On an average, mutual funds are adding about 15 lakh folios each month so every six months there should be an accretion of 1cr folios. However, reality is never linear, as we have seen frequently in the past. The good thing is that retail investors are still flocking to SIP as the first port of call.
There is a huge untapped market. There are over 9 crore registered investors on BSE, over 25 crore insurance policy holders and over 90 crore mobile owners. In the midst of this data overload, there is surely a much bigger SIP opportunity to savour.