December 2023 SIP inflows at Rs. 17,610 crore; SIP AUM nears Rs. 10 trillion

9 Jan 2024 , 01:46 PM

It would be appropriate to say that the month of December 2023 was a month of multiple records as far as the Indian mutual funds space is concerned. The overall AUM (assets under management) of the mutual fund segment as a whole crossed Rs50 trillion for the first time ever. At Rs50.78 trillion, the AUM stands at $610 billion, which is actually lower than the FII equity AUC (assets under custody), which stands at $737 billion as of December 2023. However, there were some interesting records on the SIP front.

A month of multiple SIP records

The total SIP collections for December 2023 at Rs17,610 crore is again an all-time record in terms of single month collections. Also, for the first time, the SIP AUM has now gotten tantalizingly close to the Rs10 trillion mark. At Rs9.95 trillion as of the close of December, SIPs have probably already crossed the Rs10 trillion threshold by now. But the most interesting piece of data is in the folio accretion (number of investor accounts). On a gross basis, Indian mutual funds added 266.36 lakh SIP folios in FY22 and 251.41 SIP folios in FY23. However, in the first 9 months of FY24 itself, mutual funds have added an impressive 283.58 lakh SIP folios. We are set for a huge record with still 3 months to go in FY24. Above all, it is also a signal that the penetration of SIPs is improving in a big way and in the right direction.

But, SIPs have just about scratched the surface

Even as the growth in SIP folios and SIP AUM has been frenetic post the pandemic, mutual fund experts are of the view that only the surface has been scratched. They are not totally off the mark. There are about 16 crore mutual fund folios, of which the unique investors are estimated to be under 8 crore. Now compare that with other products that have a vast retail reach. For instance, life and health insurance combined reach out to nearly 30 crore Indians. If you take bank accounts, including the Jan Dhan campaign, more than 65 crore Indians have a bank account. And, if you take the ultimate retail product, the mobile connection, there are more than 100 crore persons with a mobile phone. 

In recent months, many fund managers have expressed their view that not much is being done to reach out to the bottom of the pyramid. Today, it is possible to start a SIP account with as little as Rs100, so logically anyone with a mobile phone connection should also be a potential candidate for mutual fund investing. Also, with per capital incomes likely to grow from the current $2,500 to $3.800 over the next 5-6 years, sky is the limit as far as the potential of mutual fund retail spread is concerned. Even in the US, it is at this level of AUM that the ream mutual fund momentum was visible.

December 2023 SIP flows at record 17,610 crore 

After scaling record level of gross SIP flows each month since June 2023, we have just seen that repeat for the seventh month in a row. Last year, we spoke about SIP flows stabilizing at around Rs20,000 crore per month, which now looks perfectly possible by March 2024, if momentum is sustained. The table captures month-wise gross SIP flows in last 13 months.

Monthly MF Data	Monthly SIP Inflows  (Rs crore)
Dec-22	13,573
Jan-23	13,856
Feb-23	13,686
Mar-23	14,276
Apr-23	13,728
May-23	14,749
Jun-23	14,734
Jul-23	15,245
Aug-23	15,814
Sep-23	16,042
Oct-23	16,928
Nov-23	17,073
Dec-23	17,610

Data Source: AMFI

The last one year of SIP data shows steady growth in SIP flows with new records set in each of the last seven months since June 2023. In the last one year, the monthly SIP flows have grown 29.74%. What has actually driven this steady growth in SIP flows? In a sense, people realized post the pandemic that when it comes to mutual funds; it is time and not timing that matters. That discipline is best reflected by SIPs and for most Indians, such SIPs also synchronize with their income flows. Especially, the Gen-X and Gen-Z are a lot more sold on to this idea. The growth story becomes more lucid when we look at how each successive milestone of Rs1,000 crore additional SIP flow per month was achieved in last 7 years. 

Rs20,000 crore SIP by March 2024 now looks achievable

The table below captures the month-wise SIP flows into mutual funds since April 2016. Each milestone of an additional Rs1,000 crore in monthly SIP flow has been shaded to show you the time taken to traverse. 

Month	FY24	FY23	FY22	FY21	FY20	FY19	FY18	FY17
March		14,276	12,328	9,182	8,641	8,055	7,119	4,335
February		13,686	11,438	7,528	8,513	8,095	6,425	4,050
January		13,856	11,517	8,023	8,532	8,064	6,644	4,095
December	17,610	13,573	11,305	8,418	8,518	8,022	6,222	3,973
November	17,073	13,306	11,005	7,302	8,273	7,985	5,893	3,884
October	16,928	13,041	10,519	7,800	8,246	7,985	5,621	3,434
September	16,042	12,976	10,351	7,788	8,263	7,727	5,516	3,698
August	15,814	12,693	9,923	7,792	8,231	7,658	5,206	3,497
July	15,245	12,140	9,609	7,831	8,324	7,554	4,947	3,334
Jun	14,734	12,276	9,156	7,917	8,122	7,554	4,744	3,310
May	14,749	12,286	8,819	8,123	8,183	7,304	4,584	3,189
April	13,728	11,863	8,596	8,376	8,238	6,690	4,269	3,122

Data Source: AMFI

Here are some key takeaways from the table above.

1. SIP milestones are bunched in certain years. For example, FY18 and FY22 and 3 milestones while FY24 already has 3 milestones in 9 months with 3 months to go for the completion of fiscal year FY24. 
    
2. In the last 7 years, the crossing of a certain milestone has generally been very decisive and also trend setting. For example, it rarely happens that SIP flows dip after crossing a milestone, a classic case of persistent financialization of retail savings. 

    

3. What is the average gap between two milestones? A quick ballpark figure is 3-6 months, with the latest surge from Rs15,000 crore a month to Rs16,000 crore happening in just 2 months flat and next leap to Rs17,000 crore also happening in just 2 months. 

    

4. There is only one occasion in the last 7 years, when the next milestone was inordinately delayed. The move from the Rs8,000 crore milestone to Rs9,000 crore milestone took a full 27 months. That is due to impact of the COVID pandemic and the 2 lost years.

Can mutual funds scale the Rs20,000 crore mark by end of FY24? It will need a surge of inflows and supportive markets. However, at the current pace, Rs20,000 crore per month of gross SIP flows by end of March 2024 is perfectly possible.

What we read from the SIP Ticket (AMST)

If FY23 was great for SIP flows, FY24 promises to be better. At Rs155,972 crore, FY23 was the best year in SIP collections. However, the trend for FY24 at the end of 9 months suggests this year could be much bigger. Based on simple extrapolation, the SIP flows in FY24 could be 21.32% higher than FY23; 51.91% higher than FY22 and 96.95% higher than FY21.

Financial  Year	Gross 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	Rs155,972 crore	Rs12,998 crore
FY23-24 #	Rs189,231 crore	Rs15,769 crore

Data Source: AMFI (# – 9 month data annualized)

FY24 appears to have started on a good note with AMST above Rs15,769 crore as of the end of 9 months. Of course, this is extrapolated data, but past experience is that extrapolation of data of more than 4 months tends to reflect the full year picture accurately. Average monthly SIP ticket (AMST) measures SIP intensity, which is steadily on the way up.

SIP folios and SIP AUM: retail intensity grew sharply in December 2023?

SIP flows in value terms can be enticing, but also misleading. SIP flows capture quantum of flows but miss out on the intensity and depth of retail participation. The quantum of SIP flows is influenced by big deals, rather than quality of client spread. That lacuna in the AUM story is compensated by looking at SIP folios. How did SIP folio story pan out in December 2023? The number of SIP folios increased from 744.14 lakhs in November 2023 to 763.66 lakhs in December 2023; monthly net accretion of 19.52 lakh SIP folios or 2.62%. SIP folios are unique to an AMC, but not about unique customers. However, they are still the best proxy for retail intensity.

What about SIP AUMs on a yoy basis? Between November 2023 and December 2023, the SIP AUM surged from Rs931,333 crore to Rs995,925; a surge of +6.94% over November and an increase of +15.82% over October 2023. SIP AUMs tend to be less representative of retail intensity compared to SIP folios since SIP AUM is also influenced by index accretion. In fact, this surge in the SIP AUM in November and December is largely a function of Nifty and Sensex at new highs. The good news is that the SIP AUM is almost at Rs10 trillion, with 3 months to go for FY24. 

SIP stoppage ratio: Tapers to 51.6% in December 2023

AMFI reports monthly SIP flows on a gross basis and not on a net basis. That gap is explained by the SIP stoppage ratio. SIP stoppage ratio is the ratio of SIP accounts discontinued to new SIP accounts opened. SIP accounts are discontinued; either because the SIP accounts are fully redeemed, stopped, or just not renewed. Lower the SIP Stoppage Ratio, the better as it indicates that fewer SIPs are being discontinued and that is a sign of stickiness of SIP investments. Here is SIP stoppage ration month-wise in the current fiscal.

Apr-23	May-23	Jun-23	Jul-23	Aug-23	Sep-23
67.54%	57.45%	54.93%	54.14%	54.54%	56.27%
Oct-23	Nov-23	Dec-23
50.69%	54.19%	51.60%

Apparently,  after starting off at an elevated level of SIP stoppage ratio at 67.54% in April 2023, the SIP stoppage ratio has consistently been below the 55% mark through the rest of the year. The average SIP stoppage ratio must gradually drift towards the 50% mark by the end of FY24, to get the full benefits of SIP folio growth.

There is mixed news on the monthly data front. The SIP stoppage ratio for October 2023 was at 50.69%; but again, bounced to 54.19%, probably an indication that people are getting wary at higher levels. However, SIP stoppage ratio still remains under 55% after a very disconcerting start to the year.

SIP stoppage ratio: cumulative picture for FY24

Here is the SIP stoppage ratio in last 5 fiscal years with the updated SIP stoppage ratio for the latest fiscal year FY2023-24 comprising of 9 months to December 2023.

FY 2019-20	FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24*
57.84%	60.88%	41.74%	56.94%	54.98%

Data Source: AMFI (* based on 9-months data)

The cumulative SIP stoppage ratio for the first 9 months of FY24 is down 196 basis points at 54.98%. The spike in SIP stoppage ratio in FY20 and FY21 was driven by COVID uncertainty and withdrawals for cash flow emergencies. That is why, in FY22 the SIP stoppage ratio moderated to a more normalized level of 41.74%. 

However, the preferred range for SIP stoppage ratio is of 40% to 45%; so, there is still a long way to traverse. There have been concerns that there is a gap between gross SIP flows and net flows and that is explained by the SIP stoppage ratio. In India, the pace of SIP growth will happen on its own momentum, especially with the influx of millennials into the investment ambit. The real challenge will be to ensure that the SIP stoppage ratio edges lower. It will ensure that the gains of SIP growth are not frittered away.