SIP discontinuation aggravates in May amid regulatory changes, lower NFOs
The SIP stoppage ratio, which indicates how many SIPs were closed for every new account, reached a record 0.88 in May 2024 compared with the long term average of 0.51 according to the data from the Association of Mutual Funds in India (AMFI).
The , which indicates how many SIPs were closed for every new account, reached a record 0.88 in May 2024 compared with the long term average of 0.51 according to the data from the Association of Mutual Funds in India (AMFI). A rising ratio suggests that the pace of closures outweighs new additions.The spike in the ratio can be attributed to rejections of several or due to new account cancellation norms. According to a SEBI circular, if an investor misses SIP instalment for three consecutive months, it would lead to the cancellation of the SIP. Previously, AMCs used their own discretion while deciding when to cancel the SIP in such a case. The other reasons for a higher stoppage ratio were digital platforms not aggressively promoting new accounts ahead of elections and a lower new fund launches (NFO) during the month.
In May 2024, the number of SIP accounts that completed their tenure or were discontinued surged to a record high of 43.96 lakh, while new SIP registrations stood at 49.74 lakh, resulting in a net SIP account registration of 5.78 lakh—the lowest in 42 months. Over the previous six months, the average net was 23.34 lakh per month.
Despite the higher stoppage ratio, the total SIP book continued to grow on a month-on-month basis, reaching Rs 20,904 crore at the end of May 2024. The average ticket size of SIP accounts rose to Rs 2,386 in May 2024—the highest in 39 months. This indicates an improvement in the quality of SIPs, as SIP accounts that are not contributing are gradually removed from the total SIP account tally.
Source: Stocks-Markets-Economic Times
