January 2024 SIP inflows at ₹18,838 Crore; as SIP folios near 8 Crore

9 Feb 2024 , 02:03 PM

The month of January 2024 was when the mutual fund industry consolidated on the records created in the previous month. The overall AUM (assets under management) of the mutual fund segment as a whole stood at ₹52.74 Trillion for the first time ever. The AUM translates in dollar terms into $635 Billion, which is still lower than the FII equity AUC (assets under custody), which stands at $750 Billion as of January 2024. However, the fact is that the AUM of mutual funds and LIC combined is now worth more than $1.20 Trillion; and that is good enough to offset any volatility that FPIs may engender in the Indian markets.

Quick Detour – Why XIRR is a better barometer of SIP performance?

The most effective way to measure the returns on a SIP is XIRR. So, what exactly is XIRR? XIRR (extended internal rate of return) is a single rate of return that provides the current value of the entire investment when applied to each systematic investment plan (SIP). Unlike a lumpsum investment, the SIP is over a time period, so the time value of each instalment differs. To address that issue, the XIRR will give a better picture compared to CAGR of the fund. Let us compare the CAGR and XIRR of the same fund by juxtaposing an example of lump sum investment versus SIP investment.

Say, you invest a lumpsum of ₹10 Lakh in an equity fund and the value grows to ₹18 Lakh in 12 years. That is appreciation of 80% over 12 years or a CAGR of 5% annually. That just covers inflation and hardly attractive. Instead, had you done SIP of ₹6,945 in this equity fund over 12 years, what would be the outcome? You would have again invested ₹10 Lakh and it would have grown to ₹18 Lakh. However, due to the periodic outflow, your IRR would be around 9.5%. Also, the funds lying idle can be parked in a liquid fund, which adds another 4% to annual returns. That is why XIRR is a more effective measure for SIPs.

January SIP flows at record ₹18,838 Crore 

After scaling record level of gross SIP flows each month since June 2023, we have just seen that phenomenon repeat for the seventh month in a row. Last year, we mentioned briefly about SIP flows stabilizing at around ₹20,000 Crore per month, which now looks perfectly possible by March 2024, just looking at the pace of SIP accretion. The table captures month-wise gross MF SIP flows in last 13 months.

Monthly MF Data	Monthly SIP Inflows  (₹ Crore)
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
Jan-24	18,838

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 13 months, there were 3 occasions (February 2023, April 2023, and June 2023) when sequential SIP flows were lower than the previous month. In all other months, the sequential flows have been higher. In the last one year, monthly SIP flows grew 35.96%. There are several factors driving interest in SIPs. Post pandemic, investors realized that when it comes to MFs; time matters more than timing. 

That discipline and persistence is best embodied by SIPs and for most Indians, such SIPs also synchronize with their income flows. When your income flows are monthly, it is logical that your SIP outflows must be synchronized. In India, Gen-X and Gen-Z are sold on to this idea of SIPs. The growth story becomes more lucid when we look at how each successive milestone of ₹1,000 Crore additional SIP flow per month was achieved in last 7 years. 

Can we touch ₹20,000 Crore monthly SIP flows in FY24?

Before we go to the multi-year SIP table, there is an interesting piece of data. January 2024 saw sequential SIP accretion of ₹1,228 Crore or 6.97%. The table below captures month-wise SIP flows into mutual funds since April 2016. Each milestone of an additional ₹1,000 Crore in monthly SIP flow has been shaded to highlight time taken. 

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	18,838	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 4 milestones in 10 months and could as well see a record of 5-6 milestones in 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, which is indicative of the 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 ₹15,000 Crore a month to ₹16,000 Crore happening in just 2 months flat and next leap to ₹17,000 Crore also happening in just 2 months. However, the sequential SIP accretion in rupee terms has been the highest in January 2024.

    

4. There is only one occasion in the last 7 years, when the next milestone was inordinately delayed. The move from the ₹8,000 Crore milestone to ₹9,000 Crore milestone took a full 27 months. However, that was due to the 2 lost years of the COVID pandemic.

Can mutual funds scale the ₹20,000 Crore mark by end of FY24? Remember, if the current momentum is maintained, we could see the mark in February itself. However, February happens to be a truncated month and that normally tends to impact the SIP flows.

Major takeaways from the SIP Ticket story

If FY23 was great for SIP flows, FY24 promises to be even better. At ₹1,55,972 Crore, FY23 was the best full year in SIP collections. However, the trend for FY24 at the end of 10 months suggests this year could be much bigger (in fact, it has already crossed full year FY23 levels in 10 months). Based on simple extrapolation, the SIP flows in FY24 could be 23.68% higher than FY23; 57.87% higher than FY22 and 100.78% higher than FY21.

Financial  Year	Gross Annual SIP  flows (₹ Crore)	Average Monthly SIP Ticket (AMST)
FY16-17	₹43,921 Crore	₹3,660 Crore
FY17-18	₹67,190 Crore	₹5,600 Crore
FY18-19	₹92,693 Crore	₹7,725 Crore
FY19-20	₹100,084 Crore	₹8,340 Crore
FY20-21	₹96,080 Crore	₹8,007 Crore
FY21-22	₹124,566 Crore	₹10,381 Crore
FY22-23	₹155,972 Crore	₹12,998 Crore
FY23-24 #	₹192,913 Crore	₹16,076 Crore

Data Source: AMFI (# – 10 month data annualized)

FY24 appears to have built up momentum on a good note with AMST at ₹16,076 Crore as of the end of 10 months. Of course, this is extrapolated data, but 10 months of data is statistically significant and sufficient to give a realistic full-year picture. Average monthly SIP ticket (AMST) measures SIP intensity, which is steadily on the way up.

How did SIP folios and SIP AUM grow in January 2024

SIP flows in value terms can be enticing, but generally misleading. SIP AUM shifts capture quantum of flows but miss out on the intensity and depth of retail participation. The quality of the client distribution or retail penetration can be best understood if we look at the growth in SIP folios. How did SIP folio story pan out in January 2024? The number of SIP folios increased from 763.66 Lakhs in December 2023 to 791.71 Lakhs in January 2024; monthly net accretion of 28.05 Lakh SIP folios or 3.67%. 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 December 2023 and January 2024, the SIP AUM surged from ₹9,95,925 Crore to ₹10,26,996 crore; a surge of +3.12% over December 2023. This is lower than the growth in the previous month, but that is because the market performance in January was not as robust as in December. The surge in the SIP AUM in November and December was largely about Nifty and Sensex at new highs; while the January 2024 accretion is largely driven by incremental SIP flows. The good news is that the SIP AUM has now crossed the ₹10 Trillion mark.

SIP stoppage ratio: Tapers to 45.89% 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; which is the ratio of SIP accounts discontinued to new SIP accounts opened. SIP accounts are discontinued because SIP accounts are fully redeemed, stopped, or just not renewed. Lower the SIP Stoppage Ratio, the better it is. Interestingly,  the month of January 2024 was the first time that the SIP stoppage ratio fell below 50% mark in FY24. That is positive and implies greater stickiness among investors about SIPs.

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	Jan-24
50.69%	54.19%	51.60%	45.89%

Apparently,  after starting off at an elevated SIP stoppage ratio at 67.54% in April 2023, the SIP stoppage ratio has trended gradually below the 55% mark through the rest of the year. January 2024 was the first time it went as low as 45.89%. The average SIP stoppage ratio must now sustain below the 50% mark 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. In comparison, the latest month of January 2024 is special in the sense that the SIP stoppage ratio has fallen by nearly 571 basis points.

SIP stoppage ratio: Bird’s Eye view of 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 10 months data to January 2024.

FY 2019-20	FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24*
57.84%	60.88%	41.74%	56.94%	53.57%

Data Source: AMFI (* based on 10-months data)

Between December 2023 and January 2024, the cumulative SIP stoppage ratio for FY24 is down 141 basis points at 53.57%. Compared to FY23, the updated SIP stoppage ratio for FY24 is a full 337 basis points lower. The spike in SIP stoppage ratio in FY20 and FY21 was due to 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%. 

The preferred range for SIP stoppage ratio is of 40% to 45%; so, there is still a long way to traverse. However, the January SIP stoppage ratio is just above 45% and if that trend is maintained, the next fiscal could be a lot better. In India, the pace of SIP growth will happen on its own momentum, especially with India moving from $3.75 Trillion to $5 Trillion GDP economy by 2028 and the consequent impact on purchasing power. The real challenge will be to ensure that the SIP stoppage ratio edges lower. As long as it stays under 45%, Indian mutual funds can be sure that the gains of SIP growth are not being wasted away.