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SIP Flows Break Records, But Rising Stoppage Ratio Rings Alarm Bells
October 2024 saw record SIP inflows of ₹25,323 crore, proving India’s love for systematic investing. Yet, the SIP stoppage ratio touched 60.9%, signaling investors are pausing their SIPs faster than ever. Here’s why it matters and what it means for India’s mutual fund growth story.
Written by: SERNET Research Team
Table of Content
SIP flows great – Keep an eye on SIP Stoppage Ratio
The month of October 2024 was a robust month for SIP flows. At ₹25,323 Crore of gross SIP flows in October 2024, it was an all-time record monthly SIP flow. What is more, SIPs have gone up progressively each month to a new high since June 2023, which shows the positive traction that systematic investment plan (SIP) flows into India are building. Out of the total mutual fund folios of 21.65 Crore, SIP folios stood at 10.12 Crore; indicating that SIPs are really driving the growth in mutual fund folios overall.
As much as the SIP growth story appears to be fascinating, there are some chinks in the armour. AMFI reports gross SIP flows and you get an approximate picture of net SIP flows when you consider the SIP stoppage ratio. The SIP stoppage ratio is the ratio of number of SIPs discontinued in a period to the number of new SIPs registered. Check the table below for the month-wise data on SIP stoppage ratio.
| Apr-24 | May-24 | Jun-24 | Jul-24 | Aug-24 | Sep-24 | Oct-24 | FY25 # |
| 52.24% | 88.38% | 58.68% | 51.40% | 57.14% | 60.72% | 60.91% | 60.33% |
Data Source: AMFI (# – 7 months data)
You can see that the SIP stoppage ratio had spiked to 88.38% in May 2024 amidst the uncertainty over elections. However, since July 2024, it has been consistently on the way up. For October 2024, a total of 63.70 lakh new SIP accounts were opened, but 38.80 lakh SIPs were discontinued, resulting in the above SIP stoppage ratio of 60.91%. Let us also look at the annual picture for a more granular long-term story.
| FY 2019-20 | FY 2020-21 | FY 2021-22 | FY 2022-23 | FY 2023-24 | FY 2024-25 # |
| 57.84% | 60.88% | 41.74% | 56.94% | 52.41% | 60.33% |
Data Source: AMFI (# – 7 months data)
What do you read from the above data? SIP stoppage ratio for FY25 is now almost close to the pandemic levels of FY21, where SIP stoppage was more of a desperate measure to meet liquidity needs. FY25 is nothing of that kind, yet the SIP stoppage ratio is just too high!
Is there something like an ideal SIP stoppage ratio?
The general experience in the past has been that SIP stoppage ratio of 40% to 45% would be the ideal scenario. India has enjoyed that kind of ratio only once in FY22. In fact, between FY22 and FY25, the SIP stoppage ratio has steadily inched up from 41.74% to 60.33%. A high SIP stoppage ratio means funds are rushing to add new customers while not being able to retain existing customers. The focus may have to shift to deepening existing customer franchises rather than adding new customers. A lower SIP stoppage ratio will make the rapid growth of SIPs in India a lot more impressive.
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