SIP flows in Feb-22 stays robust at Rs.11,438 crore

Systematic investment plans (SIP) have become the mainstay of retail investors allocating money to mutual funds in the last few years. This is very with respect to equity and quasi equity funds, where investors normally use the SIP route to get the full benefit of rupee cost averaging.

SIP flows have been continuously on the rise. Since Sep-21, the SIP flows were above Rs.10,000 crore per month while it has been above Rs11,000cr a month since Nov-21. 

If the SIP flows were Rs.11,517 crore in Jan-22, it was marginally lower in Feb-22 at Rs.11,438 crore. However, that is still extremely commendable. There were a plethora of uncertainties surrounding the market during the month.

For instance, Feb-22 saw a host of headwinds like FPI selling, oil price spike and the war situation in Ukraine. Despite these factors, investors have persisted with SIPs, and that is the right way to do it.

One good way to compare the SIP flows across years is to look at the average monthly SIP ticket (AMST). Just look at the stunning growth in these numbers.

For example, the AMST was Rs.3,660 crore in FY17, Rs.5,600 crore in FY18, Rs.7,725 crore in FY19 and Rs.8,340 crore in FY20. The AMST tapered to Rs.8,007 crore in FY21 due to the lag effect of the COVID pandemic. However, in FY22 till date, the AMST is already at a healthy Rs.10,204 crore. 

SIPs are macro, for popularity you look at folios

The SIP folio is like an account number and it is unique for each person in each AMC. It gives a quick idea of breadth of retail participation. The number of SIP folios increased from 504.84 lakhs in Jan-22 to 517.29 lakhs in Feb-22.

However, during this period, the SIP AUM was lower by -4.6% at Rs.549,889 crore, but that would be largely due to the market correction. In this background, the growth in SIP folio gives a much better picture of the fact that despite the pressure from markets, investors have stayed true to their SIPs.

One important factor to look at here is what is the share of SIP AUM to the total equity AUM. While it is not axiomatic, SIP volumes are predominantly equity related volumes. As of the end of Feb-22, SIP AUM was Rs.549,889 crore while the total average equity AUM stood at Rs.13,24,548 crore.

In short, SIP AUM has a 41.5% share of overall equity AUM. According to AMFI, nearly one-third of retail investor AUM is accounted for by SIPs, which is huge. 

One important parameter to also look at is the SIP stoppage ratio (ratio of SIP accounts discontinued to new SIP accounts). It shows stickiness of clients. Between Nov-21 and Feb-21, the SIP stoppage ratio has risen from 39.9% to 47%.

This could be due to anxiety in markets amidst all the uncertainty. Normally, annualized SIP stoppage ratio of 40% to 45% is acceptable so it is in the range. However, this should not spill over too much beyond this.

Where do SIPs go from here? If the current SIP accretion rate is enhanced to about 20 lakh folios a month, then by March 2024 it is possible to achieve 10 crore SIP folios and SIP AUM of closer to Rs.10 trillion.

With equity accounts on the BSE and the demat accounts nearing the 10 crore mark, there is no reason why the SIP folios cannot touch 10 crore too. Then, SIPs will start playing a very significant role to channel retail investments into mutual funds.