The net Systematic Investment Plan inflows as a percentage of gross SIP inflows continue to disappoint mutual funds as the numbers of SIPs being stopped have increased due to investors concern over ‘high stock valuations.’

The net SIP inflow at ₹8,192 crore in January accounts for 43 per cent of gross investments of ₹18,838 crore. This is much less than net inflow of ₹8,004 crore accounting for 58 per cent of gross inflow of ₹13,686 crore in February 2023.

Akshat Garg, Senior Manager (Research), Choice Wealth, said the main reason for investors to discontinue SIPs was due to their belief that the market has reached its peak or overvalued.

This perception often arises during periods of extended market rallies or when stock prices are perceived as high relative to historical averages, he added.

The number of SIP that were discontinued in January increased 14 per cent to 23.79 lakh against 20.81 lakh in December. In fact, the stoppage of SIP has increased 80 per cent in 10 months of this fiscal from 13.21 lakh in April. SIP asset under management soared 43 per cent in 10 months of this fiscal to ₹10.27-lakh crore against ₹7.17-lakh crore.

High expectations

Parth Parekh, Head Investor Relations, Prudent Corporate Advisory Services, said new investors, of late, are investing in market through SIP lured by past one year return and they get disappointed only to stop them if they are not able to realise returns matching their expectations.

Despite this trend, he added SIPs are slowly replacing traditional investment options such as bank fixed deposits. This is evident as banks are facing challenges in mobilising deposits as retail investors are increasingly adopting equity instruments to channelise their savings, he said.

Shrey Jain, Founder and CEO, SAS Online – a deep discount stock broker, said few investors may have discontinued SIP due to underperformance of the scheme and it may not necessarily indicate investors’ fatigue. Ideally, he said investors should start SIP with a five year time frame in diversified equity funds such as flexi-cap, multi-cap equity and also multi-asset schemes at this juncture, he added.