Some Disconcerting Trends In SIP Stoppage Ratio

There are some rather surprising trends in SIP stoppage ratio (SIPs stopped to new SIPs opened) in last few months. Between January and March 2025, the SIP stoppage ratio was consistently above 100%, meaning for every SIP opened, more than one SIP was closed. In April, the SIP stoppage ratio spiked to 298%, meaning for every new SIP opened, 3 SIPs have been closed or not renewed. The impact was felt in SIP folios. The SIP folios contracted by 91 lakh folios in the month of April 2025 alone and since January 2025, nearly 1.18 crore SIP folios have vanished.

Why Has The SIP Stoppage Ratio Spiked In 2025?

• While the reciprocal tariffs were put on pause for 90-days, India has to get a trade deal done within 90 days, which looks unlikely. In the absence of a trade deal with the US, tariffs are likely to make export growth much tougher for India.
• In the last one month, the border situation has also made Indian investors cautious and they feel this may not be the right time to continue with their SIPs. This has led to a lot of SIP investors to cancel or allow SIPs to expire and take a fresh view.
• There has been a mismatch between the direction of fund flows and performance. Sector funds and small cap funds got most of the flows, but they have not only been underperformers, but have also struggled to bounce from lower levels.
• Valuations continue to be a concern, especially at a time when people are making much higher returns on assets like gold. Also, the liquidity tightness in the economy has forced many retail investors to focus more on consumption than on investing.

Yes, There Is Room For Optimism Still!

Amidst the sharp spike in the SIP stoppage ratio, there is still room for hope. Firstly, the SIP folios may have contracted by 1.18 crore in 2025, but overall SIP folios are still growing month-after-month. That shows that the SIP contraction has been compensated by an increase in non-SIP or lumpsum folios. This could either be opportunistic, or it could be a wait-and-watch approach. Either ways, the investors are still there.

Secondly, in the last 5 months active equity funds have shown compounded monthly growth in folios of 1.36%, while passive fund folios grew 1.86%. Debt fund folio growth may be relatively lower, but this category is seeing progressive improvement. This means that folios are shifting from active equity funds to passive funds and debt funds. That is normal allocation shifts among asset classes; not a real sign of concern.

There is one more trend of investors consolidating folios and exiting marginal SIPs. This is good in the long run, although we await PAN based investor data for ratification.