The humble SIP (systematic investment plan) in mutual funds is setting many interesting records, and not just its sheer size, which came in at ₹18,838 crore this January.

As of January, the mutual fund industry has recorded many new highs. Its assets under management (AUM) stood at ₹52.74-lakh crore, an increase of 33.1 per cent year-on-year.

But the AUM of SIP investments rose 52 per cent over the same period to ₹10.27-lakh crore.

So much so, SIP assets accounted for 19.5 per cent of the mutual fund industry, up from 17 per cent.

Another record in January was the registration of as many as 51.84 lakh new SIPs — a 129 per cent rise YoY — taking the total number of outstanding accounts to a whopping 7.92 crore. SIP inflows and the mutual fund industry are outpacing the growth of bank deposits in terms of assets under management (AUM) expansion.

While the number of discontinued SIPs has increased significantly, the proportion relative to total registered SIPs has declined sharply in the past year.

Nonetheless, the average investment size in mutual funds remains relatively modest. Here’s more on the above trends pertaining to mutual fund SIPs.

MFs race ahead

Though mutual funds and deposits are not comparable products, and the latter is still the key fixed income avenue for many investors, it may be worthwhile to note how rapidly the scenario is changing on the AUM front.

Relatively low interest rates from deposits and rallying equity markets post-Covid have pushed more investors towards market-linked products.

Data from Franklin Templeton Mutual Fund Industry Dashboard, the RBI and trade body AMFI indicate that SIP AUM has grown at 34 per cent compounded annually over the past five years as of January. But bank deposits have grown at only 11 per cent annually or one-third the rate of the rise of SIP AUM over the same period.

Mutual fund AUM to bank deposits stands at 26.3 per cent as of January, up from 22.4 per cent in January 2023. The overall mutual fund industry’s AUM grew at 18 per cent annually over the past five years.

With markets buoyant over the past few years and optimism prevailing for the future, AMFI’s goal of reaching ₹100-lakh crore by 2030 appears within reach, fuelled by growing SIP investments.

SIP stoppages rise

Discontinued or completed SIPs rose 77 per cent in January to 23.79 lakh, up from 13.45 lakh in January 2023.

In fact, over April 2023 to January 2024, the total number of discontinued SIPs was 179.7 lakh, higher than the entire FY23 figure of 143.15 lakh.

But when stopped SIPs are taken as a proportion of registered SIPs, the proportion has fallen sharply from 59 per cent in January 2023 to 46 per cent in January 2024.

It appears that investors are quickly stopping SIPs when they see the market turning volatile or when they sense a better opportunity in going directly to equities, both of which can result in unwelcome outcomes.

SIPs work best when investors choose a suitable consistent fund and stick to it for many years, preferably earmarked to specific goals.

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