Investors exiting SIPs on the rise

Suresh P. Iyengar | | | Updated on: Dec 11, 2021

With uncertainty looming large over jobs, many prefer to invest in lumpsum

Notwithstanding the relentless inflow into mutual funds through systematic investment plan in the last few months, the number of SIP accounts being discontinued is also raising steadily.

Interestingly, the SIP accounts discontinued or closed after their tenure at 9.25 lakh accounted for 40 per cent of the 23.18 lakh new SIP accounts opened in November.

While the new SIP accounts opened in November at 23.18 lakh were lower than 23.83 lakh accounts opened in October, the suspended SIP accounts increased to 9.25 lakh from 8.50 lakh in the same period.

In fact, in October, the number of SIPs discontinued at 8.50 lakh accounted for 36 per cent of the 23.83 lakh new accounts opened. Some of the investors who had paused their SIP during the Covid outbreak last year are still waiting to re-enter the market through their monthly contribution.

Job losses

Himanshu Srivastava, Associate Director, Morningstar India, said many people who had lost their employment and livelihood in the pandemic may take some more time to re-invest in the equity market.

With retaining jobs becoming more uncertain, especially at mid- and senior-level, many investors now prefer to make lumpsum investment rather than committing a certain amount on a monthly basis through an SIP, he added.

Most of the SIPs registered by financial advisors are ‘perpetual’ in nature as the latter tell investors that the contribution can be stopped anytime without any hassle.

Umang Thaker, Head of Products, Motilal Oswal Asset Management Company, said many SIPs were stopped during the second Covid wave and new registrations suffered. The number of new SIP accounts opened in April dipped to 14 lakh against 16.7 lakh in March, and in value terms, the inflows dropped by about ₹700 crore.

Though it is the eighth straight month of rising trend in both inflow and new accounts opened, it cannot be assumed that all investors who dropped out are back in the market. The closure of SIPs could either be due to profit-booking or could be attributed to investors turning wary of the future and waiting for the ‘right’ time to re-enter, he said.

Published on December 11, 2021
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