February 14, 2025
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SIP Stoppage Ratio Hits New High in January: Are Investors Becoming More Cautious?
January’s data reveals a sharp rise in the SIP stoppage ratio, climbing to 109%, compared to 82.73% in December and 60.72% in September of last year. This surge in cancellations and expirations has raised concerns about a potential shift in investor sentiment towards Systematic Investment Plans (SIPs).
Is this a sign that confidence in SIPs is waning? While some experts view the increase in cancellations and the dip in inflows as worrying, others consider it a natural reaction during periods of market volatility, expecting recovery once market conditions stabilize.
This latest decline, however, occurs amid significant discussions on social media, particularly about investing in mid and small-cap stocks. Several mutual fund houses have intensified their efforts to encourage long-term commitment, advising investors not to pull out or halt their SIPs due to market fluctuations or perceived overvaluation.
The Nifty 50 index has fallen by approximately 5% in the past six months, while the Sensex is down by 4%. More notably, broader indices like the BSE MidCap and BSE SmallCap are approaching bear market levels, having dropped nearly 20% from their recent highs.
The stoppage ratio increase reflects a larger trend: 61.33 lakh SIP accounts were either exited or reached their tenure in January, up from 44.90 lakh in December. In contrast, new SIP registrations rose slightly to 56.19 lakh from 54.27 lakh. Despite this, SIP inflows showed a minor decline, dropping to Rs 26,400 crore from Rs 26,459 crore in December, according to data from the Association of Mutual Funds in India (AMFI).
Some industry experts are concerned about this trend, warning that widespread SIP cancellations at the first sign of trouble could signal a lack of investor resilience. However, others urge caution, suggesting that it’s too early to interpret the data as a definitive decline. Sachin Jain, Managing Partner at Scripbox, noted that labeling this as a trend is premature.
In addition, AMFI pointed out that the decline in SIP flows was minimal, and the decrease in accounts was mainly due to a reconciliation between exchanges and the Registrars and Transfer Agents (RTAs), which resulted in a correction of around 25 lakh accounts.
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