SIPs back in limelight even as MF outflow continues

With the equity market scaling record highs, new SIP account registration has risen to a record of 16.4 lakh in January 2021, the data from the Association of the mutual fund of India (AMFI) show. This is the second month in a row when SIP registrations hit a record level. The previous peak was in January 2018 at 12.9 lakh accounts. The two-month rolling average of new SIP registration reached 30.7 lakh accounts compared with an average of 18 lakh in the past four and half years.

A sharp surge in the new SIP account opening has brought down the SIP stoppage ratio to 0.47 in January 2021, the lowest in 28 months. It is the ratio of the number of closed SIP accounts and the new accounts opened. It had peaked to 0.81 in May 2020.

Also, the net SIP account addition was 8.7 lakh in January 2021, the highest in three years. The total outstanding SIP accounts were 3.6 crore at the end of the month. The encouraging SIP data is out at a time when mutual funds have recorded net outflow for seven months in a row. The total cumulative redemption has reached to Rs 42,257 crore in the same period.

A marketing head of a leading asset management company said that SIP account opening has picked up due to several factors such as drop in the interest rate on fixed deposits, increased physical meetings with clients after relaxation of lockdown norms in July, and pick-up in consumer confidence with stability in disposable income.

SIP book which contracted for the eight months in row since April 2020 reported an uptick since December. It has remained above Rs 8,000 crore for the past two months. The assets under management (AUM) of the SIP schemes were Rs 3.9 lakh crore at the end of January 2021 accounting for 12.8% of the total mutual fund industry’s AUM.