New SIP registrations spike to over 1.42 million in Dec1 min read . Updated: 13 Jan 2021, 06:29 AM IST
Experts, however, said that some technical factors may have led to the improved performance in December 2020
The number of new systematic investment plans (SIPs) in mutual funds jumped sequentially in December while SIP inflows also gained, in a possible sign of a turnaround in India’s mutual fund industry that is facing outflows from equity funds amid a record rally in the markets.
Data from the Association of Mutual Funds in India (Amfi) showed that more than 1.42 million SIPs were registered in December, up 34% from November’s 1.06 million SIPs. At the same time, the number of discontinued SIPs rose to 776,000 in December from 724,000 in November, but the magnitude of jump was lower than the growth in fresh SIPs.
This reduced the SIP closure ratio—a measure of SIPs closed in any month to the fresh SIP accounts opened—to 54%, below the 70-80% range seen in the previous months.
Experts, however, said that technical factors may have led to the improved performance. “We have also seen a jump in SIPs in December. However, this may be because of non-working days at the end of November, leading to some November SIPs being registered in December," said Swarup Mohanty, CEO, Mirae Asset Mutual Fund.
However, this measurement effect may not fully explain the rise, given the magnitude. Monthly SIP flows also rose to ₹8,418 crore in December from ₹7,302 crore the month before.
The mutual fund industry faced steady outflows from equity funds in the second half of 2020 as investors booked profits following a sharp rise in the equities market. A record jump in demat accounts in 2020 suggests that some investors have switched to direct stock investing from MFs. December was no exception, with record outflows of ₹13,121 crore from equity MFs. However, if the increase in new SIPs is sustained in the coming months, it may presage a softening of flows out of MFs.
“Investors are not redeeming lumpsums and exiting mutual funds altogether. Many of them are entering afresh through SIPs. This is also a risk reduction strategy since the investment gets spread out," said Amfi CEO N.S. Venkatesh.