How SIP flows panned out in last five years?
This is more of a macro view. The chart considers the net SIP flows for the full year, with only FY21 being for 11 months.
One thing that emerges from the above graphic is that the average monthly SIP ticket has been gradually increasing over last four years. The average monthly SIP was Rs3,660 in FY17, Rs5,600 in FY18, Rs7,725 in FY19 and 8,340 in FY20. Considering we just have 1 more month to go in FY21 and even if you assume the normal SIP flows, we could end up an average monthly SIP flow of below Rs.8,000cr in FY21.
Let us put this figure in perspective! Despite 3-4 months of economic inactivity during FY21 on account of the pandemic, it is commendable that the SIP flows for the fiscal year could end up close to the previous year’s SIP flows. It is also indicative of the kind of SIP flows mutual funds can expect in a tough year when market valuations are already quite steep by historical standards.
SIP folios versus SIP AUM: The FY21 story
Let us spend a moment on the concept of SIP account or folio. SIP folio refers to the account that an investor holds with each AMC. For example, a person with a single PAN number can make all investments with one AMC under a common SIP Folio number. However, if they are investing across 5 different AMCs, they require 5 folios. Folios are a better gauge of retail investor appetite, despite the risk of duplication.
The chart above captures the monthly cumulative growth in SIP folios with SIP AUM. The number of SIP folios increased from 311.97 lakhs in Mar-20 to 362.92 lakhs in Feb-20: a growth of 16.33% in the last one year. During the same period, the SIP AUM (assets under management) grew from Rs239,886cr to Rs421,538cr; a growth of 75.72%. What explains this dichotomy.
To underline this gap, we indexed the above chart to the base of 100. This gap normally arises due to 2 reasons. Firstly, it could be due to larger SIP ticket sizes, which sounds slightly difficult in a pandemic year. The second reason could be the sharp appreciation in stock prices, which looks the more plausible reason considering that the Nifty is up 77% yoy.
Let us also look at whether the share of SIP AUM in overall equity AUM has changed between Mar-20 and Feb-21. As of Mar-20, the SIP AUM stood at Rs239,886cr out of an average equity AUM of Rs650,147cr, giving SIP AUM a share of 36.9%. Cut to Feb-20 and the SIP AUM stands at Rs421,538cr out of an average equity AUM of Rs971,493cr, giving SIP AUM a share of 43.4%. In short, even in the midst of this bull rally, the share of SIP AUM in overall equity AUM has grown by 650 basis points to 43.4%. So, even as redemptions from lump-sum investors has picked up steam, it is SIPs that have begun to play a bigger role in the overall equity AUM in FY21.
SIP stoppage ratio is getting better
SIP stoppage ratio measures the ratio of the number of SIP accounts discontinued in a particular period to the number of fresh SIP accounts opened during the period. Ideally, the lower this ratio, the better it is.
The graph captures the SIP stoppage ratio for FY20, month-wise for FY21 and the cumulative SIP stoppage ratio for FY21. Clearly, the pandemic had pushed up the SIP stoppage ratio to an average level of above 70% as against an average SIP stoppage ratio of just 57.84% in FY20. However, post-November, the SIP stoppage ratio has once again moderated to hover around the 50 levels, which is good news. We will most likely end the year with an average stoppage ratio higher than last year, but that is OK in a tumultuous year like 2020-21.
Major takeaway from the SIP story
The biggest untold story of FY21 has been the silent role played by SIPs especially since July 2020. During the 8 months between Jul-20 and Feb-21, net equity fund redemptions were to the tune of Rs46,790cr. However, had it not been for the robust SIP inflow of Rs62,480cr, the impact of lump-sum redemptions would have been much higher. Clearly, as lump-sum investors have gone to other pastures, SIPs have improved their share in overall equity AUM by 650 bps. That is the big SIP story of FY21.