The SIP stoppage ratio—discontinued or expired SIP accounts against new SIP registrations in a given month—spiked to 109% in January, the highest since it hit 52% in April last year, per a JM Financial Institutional Securities report dated 13 February.
In absolute terms, however, the number of outstanding SIP accounts declined from 103.2 million in December to 102.7 million in January—by about 0.5%.
Even so, the decline in outstanding SIPs—as more SIP accounts were discontinued than were registered—is an indication that recent stock market corrections have shaken the confidence of retail, or individual, investors, experts said.
Also read | Sachet SIPs: Can ₹250 a month create an investment boom in India?
Taher Badshah, chief investment officer at Invesco Mutual Fund, said that while the overall number of SIP closures does not appear to have significantly impacted overall SIP contributions, “this SIP stoppage could lead to a sharp slowdown in new additions moving forward”.
Total SIP assets under management in India dropped to ₹13.2 trillion in January from ₹13.6 trillion in December, per data from the Association of Mutual Funds of India, or Amfi.
Jay Kothari, senior vice president of equities at DSP Mutual Fund, said the SIP closures would become a real concern only if overall SIP contributions started declining and eventually stagnating.
While the drop in SIP contributions would affect monthly inflows, Kothari said it was highly unlikely that the number of outstanding SIP accounts would drop to the level of last April’s 87 million.
“It is not a structural problem yet,” he said.
A natural slowdown
In a call with journalists on 12 February, Amfi said that a reconciliation process between stock exchanges and registrar and transfer agents (RTAs) had led to the closure of 2.5 million SIP accounts, which contributed to the increase in discontinued SIP accounts in January.
According to some market participants, several investors had closed smaller SIPs to start larger ones, realign their portfolios, or combine several smaller SIPs. There were also technical factors at play, such as account changes or shifts in the mode of holding, they said.
Mode of holding refers to how an investor chooses to own mutual fund units—individually, jointly with others, or with an “either or survivor” option, which determines who has the authority to manage and make transactions within the investment account.
Also, mutual fund distributors often clean up and rebalance SIPs while reviewing their clients’ accounts.
Also read | Naren’s SIP warning: Reality check or fear-mongering?
While such factors contribute to the SIP closure figures, these do not necessarily imply that investors are stopping their SIP investments, the experts said.
Some market participants also said that discontinued SIPs outpacing new registrations may simply be a natural slowdown after the strong bull run in Indian equities in recent years. That said, they acknowledged that the current weakness could continue for a few more months until the equity markets find stability.
The Nifty 50 gained about 90% in the past five years but in the previous six months the benchmark index lost about 6.56%.
SIP returns over the past 12 months have turned negative in a number of large-cap, mid-cap and small-cap mutual funds schemes because of the recent sharp market correction, said Venkatesh Balasubramaniam, managing director and co-head of research at JM Financial Institutional Securities.
“The market correction in January 2025 and February 2025 can cause this to continue in February too,” he said.
The Nifty 50 is down about 3.3% so far this year.
For investors, a significant opportunity
Trideep Bhattacharya, president and chief investment officer-equities at Edelweiss Asset Management Co., said SIP cancellations are typically short-lived and correct within three months.
The biggest myth about SIP cancellations is that stopping SIPs during market downturns prevents losses, he said, adding that in reality, SIPs help mitigate price risk.
“Our study shows that the risk of capital loss declines significantly with a longer investment horizon, dropping from about 10% at five years to less than 1% at 10 years. However, to benefit from this, investors must stay invested for the long term,” Bhattacharya explained.
Also read | Biggest myth is that stopping SIPs during downturns prevents losses
Kothari of DSP Mutual Fund suggested that the current lull in the stock markets could be a significant opportunity for investors to boost their SIP contributions.
By investing a fixed amount regularly, he explained, investors will automatically buy mutual fund units when prices are low or high, which will help reduce the average cost of their investment over time.