SIP flows gain further in August 2024 to ₹23,547 Crore

12 Sep 2024 , 11:37 AM

AUGUST 2024 SIP FLOWS – ONE LOOP SHORT OF 25K?

Systematic Investment Plans (SIPs) have been the key drivers of retail flows in the last few years. Today, nearly $3 billion of gross flows come into mutual funds via SIPs on a gross basis. Unlike the lumpsum flows, SIP flows happen to be stickier, and are mostly part of the financial planning exercise of families. SIPs offer advantages like rupee cost averaging, discipline in investing and an immunity to the cycles of the market over the long run. IN the last year or so, the SIP flows have been consistently growing each month, a trend not seen in the last 8 years. With the August 2024 SIP flows at a record high of ₹23,547 Crore, the 25K target is not too far off. FY25 has impressive average SIP flows of ₹21,883 per month.

Going by the early numbers of gross SIP flows in FY25, the fiscal year promises to be another bumper with the average monthly SIP flows already 31% above the previous year average. SIP flows in August 2024 at ₹23,547 Crore were 0.92% higher than the sequential July 2024 SIP inflows. The month of August 2024 saw overall mutual fund AUM rising to ₹66.70 Trillion from ₹64.97 Trillion at the end of July 2024. Of course, the AUM accretion is a mix of inflows and price appreciation, but that only applies to equity based assets. For pure active debt funds, the growth has predominantly come from flows in August 2024. The new fund offerings at a robust ₹13,815 Crore also helped in a slew of new SIP creations; since a lot of investors these days prefer to combine NFO investments with SIPs.

GROSS VERSUS NET ACCRETION TO SIP FOLIOS

The month of August 2024 saw gross SIP inflows above the ₹20,000 Crore mark for the fourth month in a row; despite the uncertainties in the Union Budget over capital gains taxation, the election ambivalence, and the uncertainty over global and domestic interest rates. There were apprehensions that higher capital gains tax on equity mutual funds would dent SIP flows; but there were no such indications, either in July or in August 2024. The gross accretion to folios at 63.93 Lakhs in August 2024 was lower than 72.62 Lakhs in July 2024, but higher than the 3 months prior to that. However, the net accretion in SIP folios in August 2024 fell to 27.40 lakhs; lower than the all-time record net SIP folio accretion of 35.29 Lakhs in July.

However, the month of August 2024 also saw a spike in SIP closures as is evident from the SIP closure ratio spike in the month. The SIP AUM in August 2024 has touched a new high of ₹13.39 Trillion compared to ₹13.09 Trillion at the close of July 2024. Between FY22 and FY23, the SIP AUM grew by just about 18.55%, while the SIP AUM growth between FY23 and FY24 was an impressive 56.84%. That can be attributed to the rally in the index, and that trend appears to be continuing in FY25 also. In fact, the SIP AUM as of the close of August 2024 is already 24.94% higher than the SIP AUM as of the close of FY24. One can logically expect FY25 to be another record in terms of SIP AUM accretion in India.

SIPS DETOUR – WHEN DISCIPLINE MEETS TIME

We often here pieces of advice like anything well begun is half done, etc. There is a lot of emphasis in starting an activity. However, when it comes to systematic investment plans (SIPs) what matters is not just starting the SIP, but sustaining the SIP. Now, sustaining the SIP means two things. Firstly, you are in the SIP for a long period of time i.e., 25 years to 30 years to get the real long term compounding benefits. Secondly, once you start the SIP, you do not terminate the SIP, till the goal is achieved. To understand this concept, let us look at how wealth is created by SIPs. There is returns on investment and then there is returns on ROI. It is the latter that compounds wealth, but for that to happen you need, not just time, but also discipline to sustain the SIP. The table below will explain a lot more eloquently.

Number of Years	XIRR	Investment Amount	Gain Amount
1-Year	12%	94%	6%
2-Years	12%	88%	12%
3-Years	12%	83%	17%
5-Years	12%	73%	27%
7-Years	12%	64%	36%
10-Years	12%	52%	48%
15-Years	12%	36%	64%
20-Years	12%	24%	76%
25-Years	12%	16%	84%
30-Years	12%	10%	90%

Data Source: FundsIndia.Com (XIRR – Extended Internal Rate of Return)

Here is what stands out about this table above. The internal rate of return (a good measure in periodic investments) is 12% all through. However, over the short term the investment corpus is predominantly made of your contribution. The cut-off year is around 10 years by which time both are equal. However, by the time you have completed 30 years in the SIP, your investment has contributed just about 10% of the final corpus,  while 90% of the corpus is accounted for by gains. That, in a nutshell, is the power of time plus discipline.

AUGUST 2024 SIP FLOWS AT RECORD ₹23,547 CRORE

Since June 2023, the SIP flows have created new record high SIP collections for 15 months in a row. While the degree of accretion may have varied, each month has seen higher SIP inflows than the previous month in these 15 months. This kind of decisive positive trend has never been seen in the last 8 years, and it is a testimony to the fact that SIP flows are here to stay. If you compare the August 2024 SIP flow with the August 2023 SIP flow, it is higher by 48.9% yoy. The good news is that, unlike the month of May 2024, the SIP closures have not been alarming in subsequent months. However, the month of August 2024 has once again seen a sequential spike in SIP closures. Here is the gross monthly SIP flow picture.

Monthly MF Data	Monthly SIP Inflows (₹ Crore)
Aug-23	15,814
Sep-23	16,042
Oct-23	16,928
Nov-23	17,073
Dec-23	17,610
Jan-24	18,838
Feb-24	19,187
Mar-24	19,271
Apr-24	20,371
May-24	20,904
Jun-24	21,262
Jul-24	23,332
Aug-24	23,547

Data Source: AMFI

Gross SIP flows into mutual funds have now been above the ₹20,000 Crore mark for the fifth month in a row with the average of FY25 at ₹21,883 Crore. While the influx of Gen-X and Gen-Z customers with their rising purchasing power and growing surpluses has helped the SIP story; a robust NFO markets has also helped to a large extent. There are 2 more factors. Investors are appreciating the role of staying put in SIPs to ensure that money works hard enough in your journey towards your financial goals. Also, the post COVID rally has underlined the merits of SIP; especially for those who had terminated SIPs in the pandemic.

SIP FLOWS – EIGHT YEAR STORY GETS MORE EXCITING

The table below captures month-wise SIP flows into mutual funds since April 2016. Each milestone of an additional ₹1,000 Crore has been highlighted in bold.

Month	FY25	FY24	FY23	FY22	FY21	FY20	FY19	FY18	FY17
March		19,271	14,276	12,328	9,182	8,641	8,055	7,119	4,335
February		19,187	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	23,547	15,814	12,693	9,923	7,792	8,231	7,658	5,206	3,497
July	23,332	15,245	12,140	9,609	7,831	8,324	7,554	4,947	3,334
Jun	21,262	14,734	12,276	9,156	7,917	8,122	7,554	4,744	3,310
May	20,904	14,749	12,286	8,819	8,123	8,183	7,304	4,584	3,189
April	20,371	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 8-year SIP flow numbers.

18. The previous fiscal year of FY24 was the best full year in terms of milestones, with 5 milestone months. This compares to 3 milestones in FY22 and in FY18. In FY25, we already have 3 milestones in 5 months. It could end up being the best year ever.
19. What was the average gap between two milestones? A quick ballpark figure is 3-6 months, although is just 2 months in FY24 and under 2 months in FY25. The average August 2024 SIP flows are about 6.73X times the August 2016 SIP flows.
20. The longest wait between two milestones of 27 months was between December 2018 and March 2021 at the COVID peak. Otherwise, the SIP flows have been growing at a robust pace all through.

With average SIP flows at ₹21,883 Crore in FY25, a logical figure to target before December 2024 would ₹25,000 Crore SIP flows per month.

HOW WE INTERPRETED THE SIP TICKET STORY?

If FY23 was great for SIP flows, FY24 was even better and FY25 has started with a big bang. At ₹1,99,219 Crore, FY24 was the best full year in SIP collections. SIP flows in FY24 were 27.73% higher than FY23; 59.93% higher than FY22 and 107.35% higher than FY21. If you annualize 5-month data of FY25, the current year is 31.81% better than FY24. It could even get a lot better.

Financial Year	Gross Annual SIP flows (₹ Crore)	Average Monthly SIP Ticket (AMST)	YOY Accretion in (%)
FY16-17	₹43,921 Crore	₹3,660 Crore
FY17-18	₹67,190 Crore	₹5,600 Crore	53.01%
FY18-19	₹92,693 Crore	₹7,725 Crore	37.95%
FY19-20	₹100,084 Crore	₹8,340 Crore	7.96%
FY20-21	₹96,080 Crore	₹8,007 Crore	-3.99%
FY21-22	₹124,566 Crore	₹10,381 Crore	29.65%
FY22-23	₹155,972 Crore	₹12,998 Crore	25.21%
FY23-24	₹199,219 Crore	₹16,602 Crore	27.73%
FY24-25	₹262,598 Crore	₹21,883 Crore	31.81%

Data Source: AMFI

If you look back at the yoy growth in the average monthly SIP ticket (AMST), the growth has been robust each year, except for the 2 years of the pandemic, which is understandable. There is a positive side to it. The so-called lost years laid the foundations for frenetic future growth in SIP flows.

SIP FOLIOS IN AUGUST 2024 – RETAIL INTENSITY STILL STRONG

The gross accretion to SIP folios were at record levels in August 2024. In FY25, April 2024 saw a robust 63.65 Lakh new SIPs registered; but May 2024 fell to 49.74 Lakhs, although June bounced back to 55.13 Lakhs. July saw record gross SIP folio addition of 72.62 Lakhs, while SIP folio additions fell to 63.93 Lakhs in August 2024. The number of SIP folios in August increased from 933.96 Lakhs in July 2024 to 961.36 Lakhs in August 2024; an effective monthly net accretion of 27.40 Lakh SIP folios or 2.93%. The SIP stoppage ratio had tapered in July, but has again bounced in August. SIP folios at 961.36 Lakhs is 47.01% of total mutual fund folios as of the close of August 2024.

What about SIP AUMs on a yoy basis? Between July 2024 and August 2024, the SIP AUM increased from ₹13,09,385 Crore to ₹13,38,945 Crore; a surge of 2.26% on sequential basis. This has been triggered by higher flows, although the index levels have only moved up marginally in the month of August 2024. That is one of the reasons, SIP intensity is better captured by the SIP folios than by SIP AUM.

SIP STOPPAGE RATIO – THINGS GET TIGHTER IN AUGUST 2024

AMFI reports monthly SIP flows on a gross basis. That gap is largely explained by the SIP stoppage ratio; which is the ratio of SIP accounts discontinued to new SIP accounts opened. Lower the SIP Stoppage Ratio, the better; as it shows stickiness in SIP accounts. Between April 2024 and May 2024, there was a sharp spike in the SIP stoppage ratio, which distorted the average FY24 SIP stoppage ratio. However, that looked like a one-off amidst heightened election-related uncertainty. The SIP stoppage ratio progressively tapered in June and July 2024. However, the SIP stoppage ratio has again spiked in August 2024.

Apr-24	May-24	Jun-24	Jul-24	Aug-24	FY24 #
52.24%	88.38%	58.68%	51.40%	57.14%	60.12%

Data Source: AMFI (# – 5-months data)

After closing FY24 with SIP stoppage ratio of 52.41%, April was flat at 52.24%, but May was a shocker at 88.38%. with the SIP stoppage ratio spiking to 57.14% in August 2024, the average for the year is also up at 60.12%. However, monthly figures of SIP stoppage ratio can be quite erratic, as we have seen in the last 5 months. For a clearer picture, we can look at the annual SIP stoppage ratios. We will also compare with the cumulative SIP stoppage ratio for FY25.

FY25 ANNUALIZED SIP STOPPAGE RATIO NEAR PANDEMIC HIGHS

Here is the SIP stoppage ratio in last 5 completed  fiscal years and for the 5 months of FY25.

FY 2019-20	FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24	FY 2024-25 #
57.84%	60.88%	41.74%	56.94%	52.41%	60.12%

Data Source: AMFI (# 5-months data)

The SIP stoppage ratio for FY24 at 52.41% was lower than FY23 and the pandemic years, but sharply higher than 41.74% in FY22. While FY25 saw a sharp deterioration in the SIP stoppage ratio in May 2024, it did recover in June and July. However, August 2024 has again seen the SIP stoppage ratio spike, taking the average for the year to 60.12%, very close to the COVID peak levels.

Is there something like an ideal SIP stoppage ratio to target? It would be comfortable as long as the SIP stoppage ratio stays between 40% and 45%. The big surge in GDP growth and consumption in India, along with a steady rise in per capita income levels, will be a boost for financialization of savings. That would be best captured by the SIP folios and SIP flows. However, for the SIP flows and the SIP AUM to be really effective, it is essential to keep the SIP stoppage ratio in check. That is currently proving to be tougher than anticipated!