March 2023 SIP flows at Rs14,276 crore sets all-time record

15 Apr 2023 , 09:14 AM

March 2023 has seen a bounce to reality with gross SIP flows touching an all-time high level of Rs14,276 crore. That is 4.3% higher than the SIP flows in February 2023. The overall SIP flows in FY23 stood at a record level of Rs155,972 crore; the best year for SIPs in Indian mutual fund history.

For FY23 overall, the SIP flows are 25.2% higher compared to FY22 and 62.3% higher compared to FY21. Clearly, it looks like the ghosts of the pandemic have not only been totally exorcised, but the demand for SIPs appears to have got a fresh impetus in the post-pandemic period. But, let us first delve into the March 2023 SIP flow data.

No ides of March for SIP flows

If February saw slightly lower SIP flows due to a shorter month, there was no such challenge in March. It was a record month with Rs14,276 crore in SIP collections at a gross level. The table below captures monthly SIP inflows between March 2022 and March 2023.

Month	Monthly SIP Inflows (Rs crore)
Mar-22	12,328
Apr-22	11,863
May-22	12,286
Jun-22	12,276
Jul-22	12,140
Aug-22	12,693
Sep-22	12,976
Oct-22	13,041
Nov-22	13,306
Dec-22	13,573
Jan-23	13,856
Feb-23	13,686
Mar-23	14,276

Data Source: AMFI

There is something called the March effect in mutual fund SIP flows. In the last 7 financial years, March has been the best month for SIP collections in 6 out of these 7 years, with FY19 being just a marginal exception. That is due to a slew of NFOs that normally hit in March and also the surge in ELSS and other tax saving investments that investors undertake. Overall, if one looks at the SIP trend over the last 2 years, it is a story of consistent progression.

Women have been buying MF SIPs with a vengeance

In an interesting data release, AMFI has published data on women who entered the mutual fund market in the last 3 years and how their numbers have grown. 

• Between December 2019 and December 2022, the number of women MF investors rose from 46.98 lakhs to 74.40 lakhs, representing a 3 year absolute growth of 58.4%. What is interesting is that this accretion has happened through the COVID period.

   

• The city-wise break up of women investors is also interesting. Women investors from the top-30 (T-30) cities grew 49.1%  in these 3 years from 27.94 lakhs to 41.66 lakhs. During the same period, women investors in B-30 cities grew 72.4% from 19.04 lakhs to 32.82 lakhs. Women from smaller towns are also aggressively investing in MFs.

   

• What is most significant is the age-wise break-up of women investing in mutual funds. The age group with the maximum number of women investors is the 45+ age group, which is understandable as that is when they have investable surpluses. But what is also interesting is that the number of women investors in the age bracket of 18 to 24 years have grown 4-fold in the last 3 years. This is predominantly money that is coming from young professionals into the mutual funds via the SIP route.

An interesting piece of data is that women appear to be more aggressive in direct plans over regular plans compared to their male counterparts. Clearly, the age old money savvy and cost consciousness of Indian women is still intact.

Annual SIP flows and average monthly SIP ticket

At Rs155,972 crore, FY23 is the biggest year in SIP collections by a margin. If we look at the underlying trend, SIPs have been consistently growing, except for a brief lull in FY21 due to the pandemic. It remains to be seen how FY24 pans out, but the good thing is that investors are now looking at SIPs as a long term story rather than a play on market cycles.

Financial  Year	Net 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

Data Source: AMFI

While the SIP flows are more straight forward, another interesting metrics to evaluate the SIP intensity is the average monthly SIP ticket (AMST). That is the monthly average SIP flow during any year, captured in the third column of the above table. This has been steadily increasing over the last 6 years, as illustrated in the table. So, what is the big takeaway from the SIP flows and the AMST data?

The big takeaway is that the recovery post COVID has been robust and decisive. FY23 was a year of domestic and global headwinds. Despite higher inflation, central bank hawkishness, fears of recession and domestic balance sheet risks; SIP flows have built traction in FY23. The surge in millennial participation with a strong equity bias was a key contributor.

Reading the March retail story through SIP folios and SIP AUM

SIP flows in value terms can be enticing, but misleading. In isolation, it does not capture retail intensity as clearly as the growth in SIP folios. In fact, SIP folios and SIP AUM are proxies for assessing retail spread, although SIP folios (MF accounts unique to an AMC) are more reliable.

How did the SIP folio story pan out in March 2023? The number of SIP folios increased from 628.26 lakhs in February 2023 to 635.99 lakhs in March 2023. That is monthly net accretion of 7.73 lakh SIP folios or 1.23%. While the gross SIP growth has been robust, the net impact is tepid due to a higher proportion of SIP closures in FY23 due to macro uncertainty.

What about SIP AUMs on a yoy basis? Between March 2022 and March 2023, SIP AUM increased from Rs576,358 crore to Rs683,296 crore; a growth of 18.6%. Despite solid folio growth, the SIP AUM growth has faced some challenges due to steady SIP closures. 

SIP stoppage ratio needs to trend lower in FY24

SIP stoppage ratio is the ratio of SIP accounts discontinued to the new SIP accounts opened. It shows the stickiness or SIP retention. Lower this ratio, the better it is since it indicates that fewer SIPs are either being discontinued or not renewed. For FY20, the SIP stoppage ratio was 57.84% and it had peaked in FY21 at 60.88%. There was a reason for a high SIP stoppage ratio, back then. 

SIP stoppages in FY20 and FY21 were driven by COVID uncertainty and withdrawals for cash flow emergencies. Later in FY22 the SIP stoppage ratio fell to 41.74%. Ideally, SIP stoppage ratio in the range of 40% to 45% is considered acceptable. In FY23 SIP stoppage ratio for the month of January 2023 was 59.38% and February was 67.9%. In March 2023, it was fairly high at 64.3%. For FY23 overall, the SIP stoppage ratio stood at elevated levels of 57.74%.

In FY23, the gross SIP account accretions were lower at 251.41 lakhs compared to 266.36 lakhs in FY22. At the same time, the SIP closures in FY23 at 145.16 lakhs were sharply higher than 111.17 lakhs SIP account closures in FY22. The priority should be to hold the SIP stoppage ratio under 50% in FY24. However, the good news is that SIPs may have just scratched the surface. Here is an economy with $3.4 trillion of GDP and set to become $5 trillion by 2030. Even if you consider the number of mobile connections or bank accounts, SIP numbers are too small. Therein lies the biggest opportunity to tap on the SIP front.