SIP inflows in July 2023 at record Rs. 15,245 crore

14 Aug 2023 , 10:07 AM

The new fiscal has surely started with a bang. 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, spiked to Rs14,749 crore in May 2023 and almost flat at Rs14,734 crore in June 2023. However, in July 2024, gross SIP flows crossed the Rs15,000 crore mark for the first time, clocking Rs15,245 crore of SIP inflows in the month. That translates into average SIP flow of Rs14,614 of gross flows in FY24, in the first 4 months. For now, it looks like FY24 could be at least 12.44% better than FY23 in terms of SIP collections, but we have to await the final numbers to bs sure. That is because SIP investors are largely retail mutual fund investors. They tend to get wary after a sharp rally in the markets as SIPs do not work as well as a lumpsum investment in a rising market. However, here it must be said that Indian SIP investors have shown a lot of stickiness.

For the full fiscal year FY23, SIP flows were 25.2% higher compared to FY22 and 62.3% higher compared to FY21. If we annualize the first 4-months of SIP flows an extrapolate for FY24, then the full year promises to report SIP flows that are 12.44% higher than FY23, 40.78% higher than FY22 and 82.52% higher than FY21. Clearly, SIP flows in India are a good representation of the post-COVID bounce in the Indian economy and the Indian markets. But that is not the point. The actual point is that COVID proved to be a great lesson for SIP investors. The ones who stuck on to their SIPs were laughing all the way to the bank while the ones who exited their SIPs in panic, were left ruing their bad luck. This lesson from COVID attracted a new breed of young millennial investors into mutual fund SIPs. The other interesting trend is that bulk of the SIP flows are not coming from the metros but from smaller towns, where the SIP cult is spreading rapidly. Investors, especially in smaller towns, are realizing that in the long run it is time in the market and not timing the market that really works in your favour. Nothing is a better exemplar of that philosophy than SIPs.

July 2023 SIP flows finally crosses the monthly Rubicon

After scaling record level of gross SIP flows at Rs14,749 crore in May 2023, the June 2023 SIP flows were marginally lower at Rs14,734 crore. However, July marked a new statistical record in gross SIP flows as the month attracted SIP flows of Rs15,245 crore. The table below captures the month-wise gross SIP flows over the last one year.

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

Data Source: AMFI

Quick detour – when is it justified to stop a SIP?

In our Quick Detour section; we will take a counter view. Ask any financial advisor and they will tell you that the only way to create wealth in the market is to start a SIP in a good mutual fund and let it continue. Prima facie, that is not wrong. If you start a good SIP and persist over a period of 15 to 20 years, then you are more likely to end up richer than ending up poorer. But, let us look at a counter view. When is it a good time to terminate a SIP. We will look at two occasions.

Let us first look at when it makes sense to terminate the SIP in totality. Let us say you have linked an equity SIP to your daughter’s college education. That is a long term life goal and the particular SIP has been pegged this particular goal. At that point, there is no point exerting yourself about whether to exit the SIP or continue the SIP. Your SIP was pegged to a goal and when it is time to fund goal, you have to monetize the SIP. At that point, your goals reign supreme and it does not matter what is your view on the market or the fund. You must monetize the SIP accumulation to meet your goal.

The other justification to exit SIP is slightly different. It has nothing to do with your goal or with SIPs as a product. You have issues with the particular fund where your SIP is ongoing. Either the fund has diverged from the original intent of the fund or the fund management style may have changed and may not be to your liking. At times, funds change their objective to chase returns, but it could create concentration risk in your portfolio. That is the time to exit the fund. Don’t worry about taxes and losses at that juncture. Then  you can decide where you want to shift the funds.

Our quick thoughts on the SIP Ticket (AMST)

At Rs155,972 crore, FY23 was the biggest year in SIP collections. However, if early trends are anything to go by in the first 4 months, then FY24 promises to be even bigger. In fact, if you extrapolate the SIP flow numbers of the first 4 months of FY24, then full-year SIP collections for FY24 could be closer to Rs175,368 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 12-13% 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 #	Rs175,368 crore	Rs14,614 crore

Data Source: AMFI (# – 4 month data annualized)

FY24 appears to have started on a good note with AMST being 12.43% higher than FY23. This is just indicative since the average is based on just 4 months of SIP flow data. However, as the time goes up, this number becomes increasingly representative. It is apparent 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: how it grew in July 2023

SIP flows in value terms can be enticing, but it often tends to be misleading. SIP flows capture quantum of flows but miss out on the intensity and quality of retail participation. That gap is made up by SIP folios; which are mutual fund investor accounts unique to an AMC. 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 be exactly unique, but they are more reliable barometer of retail intensity. 

How did the SIP folio story pan out in July 2023? The number of SIP folios increased from 665.37 lakhs in June 2023 to 680.53 lakhs in July 2023. That is monthly net accretion of 15.16 lakh SIP folios or 2.28%. While the gross SIP growth has been robust, net impact has improved due to lower SIP closures in FY24, which we will come back to later.

What about SIP AUMs on a yoy basis? Between June 2023 and July 2023, SIP AUM increased from Rs793,609 crore to Rs832,275; a growth of 4.87%. The SIP AUMs have been growing at around 5% monthly on an average, with nearly half the thrust coming from SIP folio accretion and the other half thrust coming from index appreciation. For now, SIP stoppage remains a challenge. While SIP closures have come down in recent months, it still remains much higher than the median, and that is what remains a challenge for net SIP growth.

SIP stoppage ratio: How the story evolved in July 2023

AMFI reports SIPs on a gross basis. 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%	57.62%

Data Source: AMFI (* – based on 4-months data)

Clearly, the SIP stoppage ratio for July 2023 at 54.14% is 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. 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 57.62% and this can be attributed to the elevated levels of the Nifty and the Sensex. Going ahead, the real challenge will be containing this SIP stoppage ratio as it can offset a lot of the fund infusion that SIPs are bringing in. If that is achieved, that is half the issue resolved.