SIP inflows for September 2023 cross Rs16,000 crore

13 Oct 2023 , 12:28 PM

Records just get better for the SIP story

If the first 6 months of FY24 are anything to go by, the full year promises to be another record year for SIP flows. If you look at the SIP flows in FY24, it was Rs13,728 crore in April 2023, Rs14,749 crore in May 2023, Rs14,734 crore in June 2023 and Rs15,245 crore in July 2023 and Rs15,814 crore in August 2023. For September 2023, the gross SIP flows have touched a high of Rs16,042 crore. For FY24, this translates into average SIP flow of Rs15,052 crore per month for the first 6 months of the financial year. If you extrapolate this data, it looks like FY24 could be at least 15.81% better than FY23 in terms of SIP collections, but we have to await the final numbers. It remains to be seen if the Nifty struggling around the 20,000 levels impacts SIP flows? However, the one lesson that retail investors did learn from the pandemic is that those who stick with SIPs in tough times, end up looking much smarter.

For the fiscal year FY23, SIP flows were 25.2% higher compared to FY22 and 62.3% higher compared to FY21. If we annualize the first 6-months of SIP flows and extrapolate for FY24, then the full year promises to report gross SIP flows that are 15.81% higher than FY23, 45% higher than FY22 and 88% higher than FY21. SIP flows in India may be reflecting the post-COVID bounce in the Indian economy and Indian markets; but that risks missing the point. Actually, COVID proved to be a great lesson for SIP investors. The ones who stuck on to their SIPs laughed all the way to the bank and the investors who exited in panic ended up missing the golden goose. That lesson appears to have been embedded into investors, especially the millennial investors, looking at mutual fund SIPs for the long haul. In recent months, data suggests that investors are not perturbed by the market vagaries and they are willing to invest in SIPs for long term goals. That is the way it should be.

September 2023 SIP flows cross the Rs16,000 crore Rubicon

After scaling record level of gross SIP flows at Rs15,245 crore in July 2023, and Rs15,814 crore in August; the gross SIP flows for September 2023 stood at a record Rs16,042 crore. Last year, we had spoken about SIP flows stabilizing at around Rs20,000 crore per month, which looks perfectly possible and workable at this juncture, as there are 6 months to March 2024. Here are the month-wise gross SIP flows over the last one year.

Monthly MF Data	Monthly SIP Inflows  (Rs crore)
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
Apr-23	13,728
May-23	14,749
Jun-23	14,734
Jul-23	15,245
Aug-23	15,814
Sep-23	16,042

Data Source: AMFI

The last one year of SIP data shows steady growth in SIP flows. For a long time, Indian investors got it all wrong. They were putting short term available funds in equity and the long term funds like provident funds were going into bonds. That has reversed and that is largely thanks to SIPs. This will become  lot clearer, when we look at how each successive milestone of Rs1,000 crore additional SIP flow per month was achieved in last 7 years. 

A rapid move to the Rs16,000 crore milestone

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		13,573	11,305	8,418	8,518	8,022	6,222	3,973
November		13,306	11,005	7,302	8,273	7,985	5,893	3,884
October		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

There are 4 major takeaways from the above table, which gives us interesting insights into the nature of SIP flows over the years. 

• Firstly, SIP milestones are bunched in 4 out of the last 7 years in March and on 2 occasions in December. While this may not have much sanctity, it does indicate that surges in SIP flows have come around quarter ends, which sounds logical.
   
• Secondly, the growth in SIP flows have been generally decisive post a milestone. In short, once a certain milestone is broker, it rarely happens that the SIP flows dip once again, a classic example of sustained financialization of retail savings. 

   

• Thirdly, if you look at the gap between each milestone, it is on an average between 3-6 months, with the latest surge from Rs15,000 crore a month to Rs16,000 crore a month happening in just 2 months flat. This is only the second occasion in the last 7 years when the milestone has been traversed in just 2 months flat.

   

•  One exception is the move from Rs8,000 crore milestone to Rs9,000 crore milestone, which took a full 27 months. To be fair, that is due to the impact of the COVID pandemic and the 2 lost years in between for mutual fund growth. 

However, on the positive side, it must be said that it was the COVID period that set the tone for a long term spike in mutual fund SIP flows.

What we read from the SIP Ticket (AMST)

If you thought that FY23 was great for SIP flows, then FY24 promises to be still better. At Rs155,972 crore, FY23 was the biggest year in SIP collections till date, if you look at full fiscal years. However, the trend for FY24 at the end of 6 months suggests that FY24 could be much bigger. If you do so much as to extrapolate the SIP flow numbers of the first 6 months of FY24, then full-year SIP collections for FY24 could be closer to Rs180,624 crore. The table below captures the data for the last 7 full fiscal years from FY17 to FY23. The good news is that the annual SIP collections are up 4-fold in last 7 years. If the current trend is reliable, then FY24 could be 16-18% better than FY23.

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 #	Rs180,624 crore	Rs15,052 crore

Data Source: AMFI (# – 6 month data annualized)

FY24 appears to have started on a good note with AMST above Rs15,000 crore for the first time ever. This is just indicative since the average is based on just 6 months of SIP flow data. However, past experience is that any extrapolation of more than 4 months tends to reflect the full year reality fairly well. Average monthly SIP ticket (AMST) measures SIP intensity. 

SIP folios and SIP AUM: did retail intensity grow in September 2023?

SIP flows in value terms can be enticing, but it can also be misleading. SIP flows capture quantum of flows but miss out on the intensity and the breadth of retail participation. That gap is filled up by SIP folios data. How did the SIP folio story pan out in September 2023? The number of SIP folios increased from 696.86 lakhs in August 2023 to 712.94 lakhs in September 2023. That is monthly net accretion of 16.08 lakh SIP folios or 2.31%. SIP folios are unique to an AMC, so a person with investments across 6 AMCs would technically have 6 unique folio numbers, or more. Even a SIP folios is not exactly unique to an investor and for that we have to look at PAN numbers, but we will skip that for now. The story is that SIP folios do serve as a good proxy for retail intensity in mutual fund investments. 

What about SIP AUMs on a yoy basis? Between August 2023 and September 2023, the SIP AUM increased from Rs847,131 crore to Rs870,363; a growth of 2.74%. SIP AUMs tend to be less representative of retail intensity compared to SIP folios since the SIP AUM is not only a function of folio accretion but also (and substantially of) index appreciation. Let us finally turn to the SIP closures and how the SIP stoppage ratio has panned out over time.

SIP stoppage ratio: Remains elevated at 56.27% for September 2023

AMFI reports monthly SIP flows on a gross basis and not on a net basis. That gap is filled by the SIP stoppage ratio. The SIP stoppage ratio is the ratio of SIP accounts discontinued to new SIP accounts opened. SIP accounts can either be fully redeemed, stopped, or just not renewed. Lower the SIP Stoppage Ratio, the better it is as it indicates that fewer SIPs are being discontinued or not being renewed. Here is the SIP stoppage ratio in last 5 fiscal years.

FY 2019-20	FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24*
57.84%	60.88%	41.74%	56.94%	56.72%

Data Source: AMFI (* – based on 6-months data)

Clearly, the SIP stoppage ratio for September 2023 at 56.27% is sharply higher than 54.54% in August and 54.14% in July 2023. This is the highest SIP stoppage ratio in the last 4 months and shows elevated risk levels creating panic among investors. 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 fell to a much more normalized level of 41.74%. However, FY22 was more of an exception in terms of low SIP stoppage ratio. The situation reversed in the next two fiscal years.

For instance, the SIP stoppage ratio bounced back to 56.94% in FY23, which is much higher than the preferred range of 40% to 45% for SIP stoppages. While the cumulative SIP stoppage for FY24 has progressively come down, the overall figure for FY24 still remains quite high at 56.72% and this can be attributed to the elevated levels of the Nifty and the Sensex. The big challenge for mutual funds from these levels is not just about making new gains but also consolidating the existing gains. For that the SIP stoppage ratio has to come down to more acceptable levels. In a country like India, the pace of SIP growth will happen on its own momentum. The big challenge will be on keeping the SIP stoppage ratio at much lower than the current levels. Else, India may just fritter away the savings advantage.