MAY 2024 SIP FLOWS – THRESHOLD OF 21K
At ₹20,904 Crore of gross SIP flows in May 2024, the India SIP story had almost traversed from 20K to 21K in just a month. The truth is we are almost there, not exactly there yet, but that is more of an academic issue. In the first two months of FY25, the gross SIP flows have been decisively above ₹20,000 Crore raising the hope that full year SIP flows in FY25 should now be well above that mark. SIP flows in May 2024 at ₹20,904 Crore were 2.61% higher than the April 2024 SIP inflow of ₹20,371 Crore. This is obviously an all-time record for monthly SIP flows. The month of May 2024 saw overall mutual fund AUM rising from ₹57.26 Trillion to ₹58.91 Trillion. This was driven by a mix of debt fund inflows, equity fund inflows, alternate fund inflows and stock market appreciation. The new fund offerings (NFOs) at over ₹10,000 Crore was also a key factor in enhanced AUM in the month of May 2024. The SIP flow growth and the AUM growth has happened despite the election uncertainty.
The month of May 2024 saw gross SIP flow above ₹20,000 Crore for the second month in a row. The gross accretion to folios at 49.74 Lakhs were lower than the folio accretion of 63.65 Lakh in April 2024. However, the net accretion in SIP folios in May 2024 was very low at just 5.78 Lakhs compared to an imposing net folios accretion of 30.40 Lakhs in April 2024. This hiatus was on account of the substantial rise in SIP closures in May. It could be that either SIPs were terminated or upcoming renewals were just ignored due to the election uncertainty in the month of May 2024. The SIP AUM in May 2024 has touched a new high of ₹11.53 Trillion. 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, but it was also due to the frenetic growth in SIP flows.
SIPS DETOUR – POWER OF PROBABILITY OF NEGATIVE RETURNS
One of the mysteries of SIPs (systematic investment plans) has been the way it compounds wealth over the long term. The general feeling is that over the longer time, the compounding works in your favour. That is absolutely correct. However, there is an interesting aspect you need to understand about how the downside risk sharply comes down over the longer term. The table below capture the probability of negative returns when you persist with equity fund SIPs for different time periods.
SIP Holding Period | 1-Years | 2-Years | 3-Years | 4-Years | 5-Years |
Probability of Negative Returns (%) | 22.5% | 16.2% | 9.8% | 5.9% | 3.3% |
SIP Holding Period | 6-Years | 7-Years | 8-Years | 9-Years | 10-Years |
Probability of Negative Returns (%) | 1.9% | 1.5% | 1.1% | 0.7% | 0.3% |
Data Source: Value Research
What are the key takeaways from the table?
That is the reason, it is necessary that you should look for longer holding period in equity funds. It substantially reduces the probability of losses for the investor..
MAY 2024 SIP FLOWS AT RECORD ₹20,904 CRORE
Since June 2023, the SIP flows have created new records each successive month for the last 1 year, which shows a lot of positive momentum in SIP flows. In fact, if you just compare the May 2024 SIP flow with the May 2023 SIP flow, it is higher by 41.73%. However, there is one catch this month. The sharp growth in gross SIP flows happened with a higher stoppage ratio; which impacted net flows into SIPs in May 2024. We will come back to this later.
Monthly
MF Data |
Monthly SIP Inflows (₹ Crore) |
May-23 | 14,749 |
Jun-23 | 14,734 |
Jul-23 | 15,245 |
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 |
Data Source: AMFI
Gross SIP flows into mutual funds have now been above the ₹20,000 Crore mark for the second month in a row. What is working for these SIPs is the momentum thrust from Gen-X and Gen-Z customers. As the purchasing power of the young population grows, SIP flows can only get better from here. Also, people are getting increasingly conscious about lifetime goals and the need to start planning for such goals early. That has also been a big driver. In the 4 years since the COVID lows, it is not just the SIP AUM, but even the SIP folios have grown at a geometric rate.
SIP FLOWS – RECAPPING THE 8-YEAR STORY
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 | 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 | 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.
With SIP flows above ₹20,000 Crore, a logical figure to target by end of March 2025 would be in the region of ₹25,000 Crore 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 2-month data of FY25, the current year could be 24.31% over FY24, but these are still early days for such audacious extrapolation.
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 | ₹247,650 Crore | ₹20,638 Crore | 24.31% |
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 quite understandable. FY20 and FY21 were, perhaps, the lost years. However, one must not forget that they also laid the foundations for frenetic future growth in SIP flows.
SIP FOLIOS IN MAY 2024 – PUTTING THEM TO THE RETAIL LITMUS TEST
At the outset, there is pressure on new SIPs registered. From 51.84 Lakh fresh SIP registrations in January 2024, it fell to 49.80 Lakh in February 2024 and further to 42.87 Lakhs in March 2024. April 2024 was better at 63.65 Lakh new SIPs registered; but May 2024 saw fresh SIPs fall back to 49.74 Lakhs. How did SIP folio story pan out in May 2024? The number of SIP folios increased from 870.11 Lakhs in April 2024 to 875.89 Lakhs in May 2024; an effective monthly net accretion of just 5.78 Lakh SIP folios or 0.66%. This was an outcome of the sharp spike in SIP stoppage ratio in May 2024, which impacted the net SIP accretion. SIP folios are unique to an AMC, but not unique to customers. For instance, while there are 18.60 Crore mutual fund folios in India, there are only 4.70 Crore unique customers as identified by PAN; although SIP folios are a fair approximation of retail intensity. SIP folios at 875.89 Lakhs is 47.1% of the total SIP folios in India.
What about SIP AUMs on a yoy basis? Between April 2024 and May 2024, the SIP AUM increased from ₹11,26,129 Crore to ₹11,52,801 Crore; a surge of 2.37% on MOM basis. The next target is ₹20 Trillion SIP AUM mark, while the monthly SIP flows are set to touch ₹30,000 Crore; which should be doable before the end of FY25.
SIP STOPPAGE RATIO – SURGES TO 88.38% IN MAY 2024
AMFI reports monthly SIP flows on a gross basis and not on a net basis. That gap is largely explained by the SIP stoppage ratio. The SIP stoppage ratio is the ratio of SIP accounts discontinued to new SIP accounts opened. Lower the SIP Stoppage Ratio, the better. Between April 2024 and May 2024, there has been a sharp spike in the SIP stoppage ratio, which has also distorted the FY24 SIP stoppage ratio. However, it is hoped that this would be a one-off event due to the heightened uncertainty around election time.
Apr-24 | May-24 | FY24 (2 months) |
52.24% | 88.38% | 68.09% |
Data Source: AMFI
After closing FY24 with SIP stoppage ratio of 52.41%, April was elevated but May was a shocker with SIP stoppage ratio at 88.38%. However, monthly figures of SIP stoppage ratio are quite erratic, as we have seen in the month of May 2024. Let us now turn to the annual SIP stoppage ratios for the last 5 years.
ANNUAL SIP STOPPAGE VOLATILE SINCE PANDEMIC?
Here is the SIP stoppage ratio in last 5 fiscal years with the updated SIP stoppage ratio for the 12 months of fiscal year FY24 and for the 2 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% | 68.09% |
Data Source: AMFI (# 2-month data annualized)
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. The FY24 SIP stoppage ratio is slightly lower than the ratio in FY23. While FY25 started steady in April, it has spiked sharply in May due to election uncertainty and that distorted the extrapolated average for FY25.
Is there an ideal stoppage ratio range? It would be good to keep SIP stoppage ratio in the range of 40% to 45%. The big surge in GDP growth and consumption in India will also combine with the financialization of savings and a massive young population entering the work force. Notwithstanding the SIP stoppage ratio, growth momentum will be robust. At 4.70 Crore unique investors, mutual fund SIPs have just scratched the tip of the iceberg!
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