iifl-logo-icon 1
IIFL

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

Feb-22 SIP flows at Rs11,438 crore shows resilience in crisis

11 Mar 2022 , 10:41 AM

The financial year FY2021-22 will only be the second occasion when the SIP flows for the year will be above Rs100,000 crore. In the ongoing fiscal year 2021-22, SIP flows crossed Rs100,000 crore in the first 10 months itself. At the close of Feb-22, the cumulative SIP flows for the year already stands at Rs112,338 crore and poised to get close to Rs125,000 crore for FY22. That would be a 25% leap over the previous record year of 2019-20.

Since Sep-21, the SIP flows were consistently above Rs10,000 crore per month and since Nov-21 it has been above Rs11,000 crore a month. From SIP flows of Rs11,005 crore in Nov-21 it picked up to Rs11,305 crore in Dec-21 and then to Rs11,517 crore in Jan-22. In Feb-22 SIP flows tapered to Rs11,438 crore, but this is still commendable considering the uncertainties surrounding the market. In Feb-22 factors like FPI selling, oil price spike and the war situation in Ukraine were strong headwinds. SIP flows measure retail participation and conviction in equities.

SIP flows in FY22 poised to close in on Rs125,000cr

In the chart, data from FY17 to FY21 represents actual yearly SIP  flows while FY22 data is 11-month data annualized. It now looks like the original estimates for FY22 may end up being on the conservative side. With each passing month, the last SIP graph gets taller and more representative of the FY22 picture. Overall SIP flows for FY22 is likely to be, at least, 22% higher than the last record year of FY20, even by simple linear extrapolation..

Data Source: AMFI (FY22 data is annualized)

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 instance, the AMST was Rs3,660 crore in FY17, Rs5,600 crore in FY18, Rs7,725 crore in FY19, Rs8,340 crore in FY20 and Rs.8,007cr in FY21. After 11 months of FY22, the average monthly SIP ticket stand at Rs10,204 crore. That is a quantum leap over earlier years. The AMST has crossed Rs10,000 crore well before the end of FY22. What is really appreciable is the robust levels of SIP flows amidst the sharp market correction and geopolitical uncertainty. That is an indication that SIPs have really come of age and Indian investors are persisting with SIPs rather than trading in and out of mutual fund units.

However, SIP flows can still be deceptive. Hence, we will also look at the SIP folios for a more reliable growth story. Before that, there are two key takeaways that emerge till now. Firstly, investors are now looking at SIPs more as a long term planning product and pegging them to goals rather than treating them as one-off investments that are purely return-driven. Secondly, investors saw during the pandemic that those who persisted with SIPs were much better off than those who redeemed their mutual fund units in apprehension.

SIP folios continued their robust growth even in Feb-22

The idea of SIPs gained ground in India in the last few years due to investors preferring SIPs as their gateway to risk assets in the market. First-time investors prefer the passive theme of SIP investing, which is a lot simpler and also more lucrative than a deliberate active investment strategy. The month of Feb-22 was the 6th consecutive month that the Rs10,000 crore SIP mark was comfortably breached and the 4th consecutive month of SIP flow staying above Rs11,000 crore. We now need to address the question of whether the growth in AUM is  supported by aggressive growth in SIP folios and SIP AUM. While folios are AMC level accounts of investors, SIP AUM represents the sum of SIP flows and market cap accretion.

Let us first turn to the SIP folio story. The number of SIP folios increased from 504.84 lakhs in Jan-22 to 517.29 lakhs in Feb-22; a monthly net accretion of 12.45 lakh SIP folios or 2.47%. During the same period, the SIP AUM (assets under management) decreased from Rs576,588 crore to Rs549,889 crore. This fall of  -4.63% is reflective of the sharp fall in the Nifty and most of the other indices, which has reduced the market capitalization of the AUM. In this background, the consistent growth in SIP folio numbers give hope.

How has the share of SIP AUM in overall equity fund AUM panned out? As of Feb-22, SIP AUM stood at Rs549,889crore out of an average equity AUM of Rs13,24,548 crore, a share of 41.52%. 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 specified period to the number of new SIP accounts opened. Lower this ratio, the better it is. This indicates the level of retention of SIP investors. In the 2 months between Nov-21 and Jan-22, the SIP stoppage ratio spiked from 39.91% to 47.00%. That is where it stands even in Feb-22. This could 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 and relentless FII selling.

Generally, annualized SIP stoppage ratio of 40% to 45% is acceptable, and currently it is at 41.02% in the first 11 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%, but it is time to be cautious.

Over the next 2 years i.e. by March 2024, The ideal target should be to achieve 10 crore SIP folios and SIP AUM of Rs.10 trillion. If the SIP account growth can be achieved, then all that is needed is some element of bullish support from the markets. Then, SIPs can really start playing a very significant role for retail investments in mutual funds.

Related Tags

  • covid-19
  • Feb-22
  • FPI selling
  • mutual funds
  • nifty
  • OIL price
  • pandemic
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More

Most Read News

Sensex and Nifty dip from record highs
19 Jun 2024|01:57 PM
Akme Fintrade IPO opens today
19 Jun 2024|01:47 PM
Zee announces Mukund Galgali as acting CFO
19 Jun 2024|01:32 PM
Read More

Invest Right News

BSE: Firing on all cylinders
10 Apr 2024|12:07 PM
Read More
Knowledge Centerplus
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Knowledge Centerplus

Follow us on

facebooktwitterrssyoutubeinstagramlinkedin

2024, IIFL Securities Ltd. All Rights Reserved

ATTENTION INVESTORS
  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

RISK DISCLOSURE ON DERIVATIVES
  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

plus
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.