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June 2022 SIP flows stable at Rs12,276 crore as investors persist

  • India Infoline News Service
  • 11 Jul , 2022
  • 12:02 PM
It may be recollected that in FY22, SIP flows overall had touched record levels of Rs124,566 crore and going by the early estimates for the first 3 months, FY23 promises to be bigger and smarter in terms of SIP flows. In April 2022, there had been a modest tapering of SIP flows to Rs11,863 crore but bounced back to Rs12,286 crore in the month of May 2022. For June 2022, SIP flows were stable at Rs12,276 crore, despite the plethora of global and domestic headwinds. Before the maze, a quick detour on the power of SIPs!

A quick detour: SIPs and the power of regular tax planning

Before going into the finer aspects of the SIP flows in June 2022, let us take a quick detour and look at how tax planning can leverage SIPs effectively.
  1. The advantage of rupee cost averaging is already well documented about SIPs. By doing SIP on an ELSS (tax saving) fund, the same benefits of rupee cost averaging can be extended to your regular tax planning exercise also.
  2. SIP on ELSS can enhance effective yield. This is true of all ELSS funds, but let us spend a moment. ELSS funds give benefits under Section 80C. If you earn 12% on your ELSS investment in 1 year, at 20% tax rate, that is equivalent to 15% effective yield.
  3. Above all, SIPs on ELSS ensure that your tax planning is in sync with your income flows and also in sync with your financial goals. There is no last minute running around to arrange funds to invest and reduce your tax liability.
So ELSS plus SIP can be a potent combination, but now back to SIP data.

How we read the SIP flow story for June 2022

FY23 may have just completed one quarter, but we now have data for 6 years in terms of monthly and annual SIP flows. If you look at the underlying trend, it has been consistently growing, except for FY21, due to the pandemic. A small caveat; FY23 data is annualized, so not strictly comparable. However, with each passing month, the FY23 data is increasingly reflective of the full-year trend. In FY22, these trends were fairly reliable and hence we can get a realistic picture by extrapolating the short term SIP flow data.



Data Source: AMFI (FY23 data is annualized)

Since absolute numbers are misleading, the average monthly SIP ticket (AMST) can be an answer. This has been on a steady uptrend over last 6 years. AMST was Rs3,660 crore in FY17, Rs5,600 crore in FY18, Rs7,725 crore in FY19, Rs8,340 crore in FY20, Rs.8,007 crore in FY21 and Rs10,381 crore in FY22. In FY23, AMST as of June 2022 stands at Rs12,142 crore.

What are the key takeaways? Firstly, SIP flows have held robust even in the absence of NFO flows, so they are literally driving equity fund flows. Secondly, SIP flows have remained stable amidst headwinds like recession fears, China slowdown, rising inflation, OPM stress, valuation worries etc. Investors have learnt that in SIPs persistence pays rich dividends.

Dissecting the SIP folio and SIP AUM story for June 2022

SIP flows in rupee terms can be enticing and simple, but also partially misleading. SIP flows do not tell you about how retail the SIP flows are. That is captured by parameters like SIP folios and SIP AUM. SIP folios and SIP AUM can be used as proxies for assessing retail spread, or you can call it the number of active retail investors in SIPs. Folios, by the way, are MF accounts unique to one particular mutual fund AMC.

Now for the SIP folio growth story in June 2022? The number of SIP folios increased from 548.41 lakhs in May 2022 to 554.89 lakhs in June 2022. That is monthly net accretion of 6.48 lakh SIP folios or 1.18%. The momentum of SIP folio accretion has been falling, but that can be attributed to uncertain market conditions. One can argue that folios do have challenges like multiple folios of the same investor and non-equity SIP folios. However, even after you adjust for these factors, SIP folios are still a good approximation of retail appetite for equity mutual funds. It may not be precise; but gives a fair median picture.

What about SIP AUMs? The SIP AUM (assets under management) decreased from Rs565,706 crore in May 2022 to Rs551,189 crore in May 2022. This fall of  -2.57% in SIP AUM in June 2022 can be attributed to the sharp fall in equity indices. However, there is an observation here. The fall in SIP AUM in June 2022 has been rather sharp, but the SIP folios have still seen robust accretion. In short, retail appetite for equity funds is robust. As of June 2022, SIP AUM accounts for one-third of overall retail Mutual Fund AUM.

SIP stoppage ratio spikes in June 2022

SIP stoppage ratio is the ratio of SIP accounts discontinued in a specified period to the new SIP accounts opened. Lower this ratio, the better it is as it indicates higher retention of SIP investors. Some of the trends are interesting. For FY20, the SIP stoppage ratio for the full year was 57.84% while for FY21 it was 60.88%.

One can attribute the high SIP stoppage ratios in FY20 and FY21 to the COVID induced uncertainty. However, in FY22, the SIP stoppage ratio gravitated sharply lower to 41.74%. That is within the acceptable SIP stoppage ratio range of 40% to 45%. However, the first 3 months of FY23 have shown a sharp deterioration in the SIP stoppage ratio.

For the first quarter of FY23, the SIP stoppage ratio stands at 54.35%. However, what is more disconcerting is that for June 2022, the SIP stoppage ratio touched a high of 63.86%. Clearly, the volatility in the equity markets, the persistent FPI selling and the uncertainty in global markets are making investors tentative. Recession fears are adding to concerns.

The last big surge in SIP accounts came from the scores of millennials entering the equity and mutual fund market. That trend may have saturated for now as they go through a reality check. The next big leap is not just about millennials or the TINA factor. It is about enticing the millions of untapped customers with bank accounts and mobile connections and drawing them into the MF SIP fold. That can be a separate debate altogether!
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September 2022 SIP flows scales to all-time record high

  • India Infoline News Service
  • 12 Oct , 2022
  • 5:42 AM
It may be recollected that in FY22, SIP flows touched record level of Rs124,566 crore. If you go by the early estimates for the first 6 months up to September 2022, FY23 promises to be much bigger in terms of SIP flows. Here is a quick peek at monthly SIP flows for the last 1 year.



Data Source: AMFI

The months of February, April and July 2022 saw modest tapering of SIP flows, but the underlying trend has been strongly positive. Between July 2022 and September 2022, monthly SIP flows bounced from Rs12,140 crore to Rs12,976 crore. This was amidst strong global headwinds and rising uncertainty. But first, a quick detour on what makes SIPs click?

A quick detour: What exactly makes SIPs click?

Looking at the way SIP flows have sustained and build heft through these uncertain times, it does appear rather enigmatic. Here is what makes SIP as an idea click.
  1. For most investors, not fully tuned into the nuances of the stock markets, SIP is almost like a passive investment. As far as they are concerned, they make the allocation and let time do the job of building wealth.
  2. SIP makes a lot of economic sense. Most people prefer to invest in SIPs each month synchronised with their income flows. This becomes a part of their discipline and also makes savings and investment a regular habit.
  3. SIP is not about amounts or the rate of return but about time. The longer you sustain your SIP, the more it works for you. Today, thanks to calculators, simulation of future wealth via SIPs has become a lot simpler for investors.
  4. In an economy that is driven by consumerism, most people find it difficult to underplay spending and overplay saving. SIP offers the best solution as it forces people to save and then spend the residual amount only.
Clearly, SIPs have come of age and the growing Indian middle class and a rising millennial population is making SIPs, as a product, a big hit among the investors.

Reading through the SIP story of September 2022

FY23 has already completed 6 months, and in addition we have data for 6 years in terms of annual SIP flows. If you look at the underlying secular trend, it has been consistently growing, except for the brief lull in FY21, amidst the pandemic. The figure for FY23 is annualized, but with six months gone, you can safely say that the bar is fairly reflective of the emerging picture for FY23. In the last few years, the observation was that the annual trend is fairly well represented by the end of the first quarter of the fiscal year.



Data Source: AMFI (FY23 data is annualized)

An interesting metrics to evaluate the SIP intensity is the average monthly SIP ticket (AMST). This has been on a steady uptrend over last 6 years. The table below captures the AMST trend since FY17.

Financial Year Average Monthly
SIP Ticket (AMST)
FY 2016-17 Rs3,660 crore
FY 2017-18 Rs5,600 crore
FY 2018-19 Rs7,725 crore
FY 2019-20 Rs8,340 crore
FY 2020-21 Rs8,007 crore
FY 2021-22 Rs10,381 crore
FY 2022-23 Rs12,372 crore

The big takeaway from the above data is that the recovery post COVID has been really strong and decisive. In the last 1 year, the SIP tickets have been consistently higher despite the global headwinds like inflation, central bank hawkishness, war and recession fears.

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

SIP flows in value terms can be enticing and simple, but it can also be misleading. SIP flows do not capture the retail intensity. That is captured 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) are more reliable.

How did the SIP folio growth story pan out in September 2022? The number of SIP folios increased from 571.61 lakhs in August 2022 to 583.77 lakhs in September 2022. That is monthly net accretion of 12.16 lakh SIP folios or 2.13%. In fact, the good news is that the SIP accretion has gone up sharply in the last 2 months, reversing the trend between April and June 2022. The folio growth reflects retail intensity and currently, the SIP folio data for FY23 is showing a lot of retail intensity!

What about SIP AUMs? Between June 2022 and August 2022, the SIP AUM had increased sharply from Rs551,189 crore to Rs639,787 crore. However, despite the robust folio numbers, the SIP AUM (assets under management) fell from Rs639,787 crore in August 2022 to Rs635,286 crore in September 2022. This fall can be almost entirely attributed to the sharp fall in equity indices, in the second half of September 2022, after the Fed turned ultra-hawkish and the Foreign Portfolio Investors (FPIs) turned net sellers. As of September 2022, SIP AUM accounted for more than one-third of overall retail Mutual Fund AUM. In any average month, it is the SIP flows driving most of the flows into equity mutual funds.
 
Good news is that SIP stoppage ratio has come down

SIP stoppage ratio is the ratio of SIP accounts discontinued in a specified period to the new SIP accounts opened. Lower this ratio, the better it is as it indicates higher retention of SIP investors. After all, you don’t want your SIP investors exiting and going away. For FY20, the SIP stoppage ratio for the full year was 57.84% while for FY21 it was 60.88%.

The high SIP stoppage ratios in FY20 and FY21 can be attributed to the COVID induced uncertainty and cash flow emergencies. That was obvious because in FY22 the SIP stoppage ratio fell to 41.74%. Ideally, SIP stoppage ratio of 40% to 45% is acceptable. In FY23 SIP stoppage ratio had touched 63.86% in June 2022 and 59.53% in July 2022. However, in August SIP stoppage fell to 54.23% and further to 48.6% in September 2022.

However, if you look at the cumulative SIP stoppage ratio for the first 6 months of FY23, it stands at 53.96%. This may not be as bad as the COVID years, but surely a lot worse than FY22. For now the focus should be to ensure that the SIP stoppage ratio comes to well below 50% by the end of FY23, which should be a comfortable scenario.

SIPs are growing and they are growing at a rapid pace. But India may have just scratched the surface. For an economy with $3.2 trillion of GDP, these SIP collections are nowhere close to full potential. Probably, the combination of the digital spread and inclusion of smaller towns in the investment mainstream should make the big difference to the future.

February effect pulls down SIP flows slightly to Rs13,686 crore

  • 13 Mar , 2023
  • 9:47 AM
  • After six consecutive months of progressively higher month-on-month SIP flows, February 2023 saw systematic investment plan (SIP) flows taper marginally by 1.23% to Rs13,686 crore.

However, the overall SIP flows in FY23 in the first 11 months are already at Rs141,696 crore with one more month yet to go. The 11-month SIP collection figure for FY23 is already higher than the SIP flows achieved in any of the previous years. In fact, if you consider the extrapolated full-year SIP flows at Rs154,578 crore for FY23, the SIP flows are estimated to be higher by 24.1% compared to FY22 and 60.9% higher compared to FY21. But first let us understand what is the February effect all about?

February effect and the impact on SIP flows

The classic February effect is about fewer number of days in the month (only 28 days), which logically leads to lower SIP collections. The table below captures the SIP inflows at a gross level between February 2022 and February 2023.

MonthMonthly SIP Inflows (Rs crore)

Feb-22

11,438

Mar-22

12,328

Apr-22

11,863

May-22

12,286

Jun-22

12,276

Jul-22

12,140

Aug-22

12,693

Sep-22

12,976

Oct-22

13,041

Nov-22

13,306

Dec-22

13,573

Jan-23

13,856

Feb-23

13,686

Data Source: AMFI

Continuing the February effect, this has been a standard feature. If you look at the last 7 financial years, the February SIP collections have been lower than the January collections in 6 out of these 7 years. In terms of yoy SIP collection growth; between February 2022 and February 2023, the SIP flows have grown by 19.7% from Rs11,438 crore to Rs13,686 crore. This has also been matched by a concomitant rise in SIP folios as we shall see later. But first a quick detour into whether ELSS SIPs are at risk of tapering and why it is a problem?

Quick detour: Will the New Tax Regime (NTR) derail ELSS SIP flows?

One of the concerns that has been expressed in the aftermath of the new tax regime (NTR) is that it may dissuade ELSS SIPs. In India, young people prefer ELSS SIPs to save tax, but with the NTR becoming default from FY24, there may not be much of an incentive for investors to commit monies to ELSS Funds. Here are 3 points to know.

  1. The impact would surely be there and for the simple reason that among all the equity fund categories, ELSS funds have the highest number of folios. At 149.68 lakhs, ELSS funds have more investor folios than any other category and this is going to be hit by the new tax regime. The impact is already visible in yoy growth in February 2023.

     
  2. However, the problems with ELSS have been two-fold. Despite the lock-in, they never really outperformed equity indices. Also, since the time the long-term capital gains on equity funds was reintroduced in 2018, there has been waning interest in ELSS as a tax saving instrument.

     
  3. On the positive side, this would impel investors to take a more financial planning approach to investing rather than be driven by tax savings. The NTR is likely to divorce the financial planning aspect from the tax planning aspect. In the long run, that is the way it should be.

So, while the impact of the NTR would be there on ELSS folios, it should be more a transfer of folios than a fall in folios. Hence, the net impact should be minimal.

Annual SIP flows and the average monthly ticket size

At Rs141,696 crore, FY23 is already the biggest year in SIP collections with 1 more month to go. If we look at the underlying trend, SIPs have been consistently growing, except for a brief lull in FY21 due to the pandemic. The figure for FY23 is annualized (in the table below), but with 11 months elapsed, it is reflective of the final picture of FY23. 

Financial 
Year
Net Annual SIP 
flows (Rs crore)
Average Monthly
SIP Ticket (AMST)
FY16-17

Rs43,921 crore 

Rs3,660 crore

FY17-18

Rs67,190 crore 

Rs5,600 crore

FY18-19

Rs92,693 crore 

Rs7,725 crore

FY19-20

Rs100,084 crore 

Rs8,340 crore

FY20-21

Rs96,080 crore 

Rs8,007 crore

FY21-22

Rs124,566 crore 

Rs10,381 crore

FY22-23 *

Rs154,578 crore 

Rs12,882 crore

Data Source: AMFI (* FY23 data is annualized)

While the SIP flows are more straight forward, another interesting metrics to evaluate the SIP intensity is the average monthly SIP ticket (AMST); which is captured in the table above in the third column. This has been steadily increasing over the last 6 years, as illustrated in the table. So, what is the big takeaway from the SIP flows and the AMST data?

The big takeaway is that the recovery post COVID has been strong and decisive even as it has been unrelenting. Despite a plethora of headwinds like inflation, central bank hawkishness and fears of recession; SIP flows have been building traction in FY23. That can be largely attributed to the surge in millennial participation with a strong equity bias.

SIP folios, SIP AUM and the retail story for February 2023

SIP flows in value terms can be enticing, but it can be misleading too. SIP flows do not capture retail intensity as well as the growth in SIP folios do. In fact, SIP folios and SIP AUM are proxies for assessing retail spread, although SIP folios (MF accounts unique to an AMC) are more reliable.

How did the SIP folio story pan out in February 2023? The number of SIP folios increased from 621.63 lakhs in January 2023 to 628.26 lakhs in February 2023. That is monthly net accretion of 6.63 lakh SIP folios or 1.07%. While the gross SIP growth has been robust, the net impact is tepid due to a much higher proportion of SIP closures.

What about SIP AUMs? Between April 2022 and February 2023, SIP AUM increased from Rs578,086 crore to Rs674,415 crore; a growth of 16.66%. Despite solid folio growth, the SIP AUM has been consistently falling since November 2022. This can be attributed to the sharp fall in equity indices in the last 3 months, which has offset the SIP inflows. 

SIP stoppage ratio remains the challenge even in February 2023

SIP stoppage ratio is the ratio of SIP accounts discontinued to the new SIP accounts opened. It shows the stickiness or SIP retention. Lower this ratio, the better it is since it indicates that the fewer SIPs are either being discontinued or not being renewed. For FY20, the SIP stoppage ratio was 57.84% while for FY21 it was 60.88%. 

There was a reason for a high SIP stoppage ratio, back then. SIP stoppages in FY20 and FY21 were driven by COVID 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 stood at 59.38%, but in February it SIP stoppage ratio surged to 67.9%.

That is high considering the last year data, but the uncertainty and headwinds are also higher in the current year. The immediate priority should be to bring down the SIP stoppage ratio closer to 50% by the end of March 2023, although it does sound ambitious. However, the real story of SIPs may have just scratched the surface in India. For an economy with $3.4 trillion of GDP and poised for $5 trillion by year 2020, these SIP numbers are just the tip of the iceberg and belie the true SIP potential that India has. That would be the subject matter of another discussion altogether.

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  • 12 October, 2022 |
  • 12:08 PM

The SIP flow data for September 2022 released by AMFI was not just stable compared to previous months, but also indicated record flows.

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