SIP story: What is the real picture; good stability or bad stagnation

IS SIP STABILITY A GOOD THING; OR IS STAGNATION A BAD THING?

In the last few months, there has been some key narrative that is missing in systematic investment plans (SIPs). The same SIPs that were driving the growth in mutual fund AUM have stagnated all of a sudden. That is evident from the ratio of SIP AUM to total AUM as well as the ratio of SIP folios to total folios. Both have stagnated in a narrow range.

There is another perspective to this story. Over the last 1 year, SIP AUM and SIP folios have grown at 15.32%. In the case of lumpsum flows; AUM increased by 13.47% while Folios grew by 13.78%. Clearly, there is a greater shift in MF flows from routine outlays to more discretionary outlays. Are SIPs losing out on the broad MF narrative?

WHAT WE READ FROM THE SIP INTENSITY TABLE

• Over the last 12 months, the ratio of SIP AUM to overall AUM has stagnated in a narrow range. The same is the case with share of SIP folios in overall folios too.

• For the purpose of this analysis, only the period post April 2025 has been considered, so that the folio clean-up exercise prior to that, does not distort the interpretation.

• While SIP folios have contracted in March and April 2026, the overall folios of mutual funds have also contracted in the month of April 2026. That is disconcerting.

• The share of SIP folios in incremental folio accretion overall has fallen from a high of 58% to as low as 33% on an average, showing the reduced role played by SIPs.

FIVE INFERENCES FROM SIP INTENSITY ANALYSIS

The broad theme seems to be that the pivotal role played by SIPs in boosting overall folios and AUM has been gradually reducing in the last one year. Here is why.

• A major factor has been the rising SIP stoppage ratio. During normal times, the SIP stoppage ratio has been around 50% to 60% in recent years. However, in the last 2 months, the SIP Stoppage has been consistently above 100%, contracting folios.

• One factor is the volatility in the market, which has caused many retail investors to panic. While SIPs work best over 8-10 years, the increased volatility and persistent FPI selling has impelled many retail investors to look for quick fix solutions.

• A lot depends on what investors get to see in the competitive space. Asset classes like gold and silver have given 70% to 150% returns in a year, while equities have given almost flat returns despite volatility. This is leading to a visual bias in investors.

• The combination of equity volatility and alternate asset class returns forced investors to take a more myopic view of SIPs. Investors have opted out of systematic investing and are adopting a more discretion-based investment approach to mutual funds.

• One factor to note is that the base we have used is May 2025, when the SIP folio clean-up had been completed. Had we taken an older base period, the actual growth in SIP folios may have been still lower than the current figure of 15.32%.

The traditional SIP narrative of “Invest and Forget” appears to be going through a rethink. The need of the hour is sustaining SIPs with more active engagement.