Mar-22 SIP flows at all-time high of Rs12,328 crore

11 Apr 2022 , 10:08 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.