The number of new systematic investment plans (SIP) opened in October fell 17 per cent to 19.73 lakh against 23.66 lakh accounts started in the previous month as investors turned cautious despite relentless equity market rally defying global and domestic economic uncertainty.

In fact, new SIP accounts started in October was the lowest in the last couple of months as the industry had opened 21.13 lakh accounts in August, according to the latest Association of Mutual Funds of India data.

The number of SIP accounts discontinued in the first eight months of this fiscal at 75.87 lakh accounted almost 54 per cent of 141.44 lakh new accounts opened in this period.

Fresh SIP account opening has fallen even as the monthly contribution hit a new high of ₹13,041 crore last month.

Overall, SIP inflow at ₹87,275 crore in the first seven months of this fiscal already touched 70 per cent of ₹124,566 crore inflow recorded in the whole of last fiscal.

profit booking spree

Kamlesh Jain, Managing Director, Smart Invest Services, said while the economic uncertainty and relentless rally in the market has been a worrying factor, the fall in new SIP accounts opened should be seen along with closure of existing accounts.

Discontinuation or matured SIP accounts has also fallen 12 per cent to 10.20 lakh against 11.50 lakh in September and has hit the lowest in last six months, he said.

This typically means that the existing investors are booking profit or withdrawing money on market rally while selling equity SIPs to new investors is becoming difficult with unjustifiable market valuation, he added.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said though valuation of Indian equity market is getting stretched, it has the best earnings growth outlook among large economies and this will attract foreign portfolio investors in coming months.

Kavitha Krishnan, Senior Analyst, Morningstar India, said the Indian stock markets witnessed an upturn last month despite the volatile global environment driven by geopolitical instability in Europe, the slowdown in China and rising inflation in the US.

While Indian economy is challenged by rising interest rates, higher inflation and depreciating rupee, she said the rise in private sector spending after a long lull will help sustain growth.