SIP inflows in August 2023 at lifetime high of Rs. 15,814 crore

13 Sep 2023 , 12:31 PM

If the first 5 months of FY24 are anything to go by, the full year promises to be another record year for SIP flows. The new fiscal has surely started with a bang and SIP flows have stayed robust even amidst markets scaling new highs. For FY23, the total gross SIP flows stood at Rs1.56 trillion for the full year. 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. For the month of August 2023, the gross SIP flows have touched a high of Rs15.814 crore. This is the second month in succession that the SIP flows have been more than Rs15,000 crore mark. For FY24, this translates into average SIP flow of Rs14,854 crore per month for the first 5 months of the financial year. If you extrapolate this data, it looks like FY24 could be at least 14.28% better than FY23 in terms of SIP collections, but we have to await the final numbers. It remains to be seen, to what extent the sharp rally in the Nifty and the struggles around the 20,000 levels of the Nifty would actually impact retail sentiments with respect to SIPs. However, the one lesson that retail investors did learn from the pandemic is that those who stick with SIPs in tough times, laugh all the way to the bank.

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 5-months of SIP flows and extrapolate for FY24, then the full year promises to report gross SIP flows that are 14.28% higher than FY23, 43.10% higher than FY22 and 85.52% higher than FY21. One can argue that SIP flows in India are a good representation of the post-COVID bounce in the Indian economy and the Indian markets. The real narrative is that COVID proved to be a great lesson for SIP investors. The ones who stuck on to their SIPs were the ones who ended up looking smart, while the ones who exited in panic ended up looking sheepish. That lesson appears to have been deeply ingrained into investors, especially the millennial investors, who are looking at mutual fund SIPs for the long haul. The SIP flows are also seeing a lot of interest from the smaller towns and not jus from the large metros. In smaller places, there is not just an interest in equity funds as an asset class, but also the willingness to hold on to SIPs for the longer haul.

August 2023 SIP flows inch closer to the Rs16,000 crore mark

After scaling record level of gross SIP flows at Rs15,245 crore in July 2023, the SIP flows built up further heft to get to Rs15,814 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. The table below captures the month-wise gross SIP flows over the last one year.

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

Data Source: AMFI

The last one year of SIP data shows steady growth in SIP flows. It has been a case of SIPs penetrating a market that was hardly into long term planning and long term investments. That appears to have changed and that is reflected in the SIP flows on a monthly basis. To buttress our point, in our detour section, we will look at the monthly SIP flow trend of the last 7 years and pick out some interest trends in terms of SIP flow growth.

Quick detour – How SIP flows crossed milestones over 7 years

The table below captures the month-wise SIP flows into mutual funds since April 2016. For better clarity. What we have also done is to shade every milestone SIP flow month, which we have defined as crossing each Rs1,000 crore of incremental SIP flows. The data in the table below is self-explicit.

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		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 3 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. Secondly, the growth in SIP flows have been steady. That means, once a certain milestone is broker, it rarely happens that the SIP flows dip once again, a classic ode to increased financialization of retail savings. 

Thirdly, if you look at the gap between each milestone, it is on an average between 3-6 months, although this time gap has compressed in recent months. One exception is the move from Rs8,000 crore milestone to Rs9,000 crore milestone, which took a full 27 months. However, that is due to the impact of the COVID pandemic and the 2 years in between were the lost years in mutual fund growth. However, the COVID period did set the tone for a long term spike in mutual fund SIP flows.

What we read from the SIP Ticket (AMST)

At Rs155,972 crore, FY23 was the biggest year in SIP collections till date, if you look at full fiscal years. However, if early trends are anything to go by in the first 5 months, then FY24 promises to be even bigger. In fact, if you extrapolate the SIP flow numbers of the first 5 months of FY24, then full-year SIP collections for FY24 could be closer to Rs178,248 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 6 years. Early trends suggest FY24 could be 13-15% 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 #	Rs178,248 crore	Rs14,854 crore

Data Source: AMFI (# – 5 month data annualized)

FY24 appears to have started on a good note with AMST being 14.28% higher than FY23. This is just indicative since the average is based on just 5 months of SIP flow data. However, as the time goes up, this number becomes increasingly representative. The past experience has bene that, 4-5 months of data generally provides a good representation of full year. The AMST is a measure of SIP intensity and denotes the average monthly SIP ticket (AMST). 

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

SIP flows in value terms can be enticing, but it can also be relatively 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; which are mutual fund investor accounts unique to an AMC. That means; an investor with investments across 4 AMCs will have 4 folios, although all holdings in a single AMC can be consolidated under a single folio. SIP folios may not exactly be unique, but they give a more reliable picture of retail intensity compared to just look at SIP flow values.

How did the SIP folio story pan out in August 2023? The number of SIP folios increased from 680.53 lakhs in July 2023 to 696.86 lakhs in August 2023. That is monthly net accretion of 16.33 lakh SIP folios or 2.40%. While the gross SIP growth has been robust, net impact has improved due to lower SIP closures in FY24, which shall look at separately.

What about SIP AUMs on a yoy basis? Between July 2023 and August 2023, the SIP AUM increased from Rs832,275 crore to Rs847,131; a growth of 1.78%. The SIP AUMs have been growing at around 5% monthly on an average, with most of the thrust coming from index appreciation and less from SIP folio accretion. That growth rate has fallen in August 2023, because although the folio accretion is still strong, the weak market conditions tended to offset most of the folio gains in the month. Let us now turn to SIP closures and how the SIP stoppage ratio has panned out over time.

SIP stoppage ratio: How the story evolved in August 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. It shows stickiness or SIP retention and also shows the net SIP flows. Lower the SIP Stoppage Ratio, the better it is as it indicates that fewer SIPs are being discontinued or not being renewed. The table below captures SIP stoppage ratio over 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%	56.84%

Data Source: AMFI (* – based on 5-months data)

Clearly, the SIP stoppage ratio for August 2023 at 54.54% is higher than July 2023 at 54.14% but lower than June 2023 at 54.93% and May 2023 at 57.45%. The progressively lower SIP stoppage ratio is indicative of investors getting stickier about SIP folios, although the bounce in August is does indicate that investors continue to panic at higher levels. 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, 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 56.84% and this can be attributed to the elevated levels of the Nifty and the Sensex. The big challenge for mutual funds is not just about the maintaining the pace of SIP growth. That will happen on its own momentum. The big challenge will be on keeping the SIP stoppage ratio at much lower than the current levels.