In January, the SIP stoppage ratio, which measures discontinued or expired SIP (Systematic Investment Plan) accounts against new registrations, soared to 109%, its highest level since last April, according to a JM Financial Institutional Securities report. This spike is attributed to a recent stock market correction that has eroded retail investors’ confidence. Consequently, the number of outstanding SIP accounts decreased from 103.2 million in December to 102.7 million in January.
Despite these closures, the overall impact on SIP contributions remains modest for now. Experts suggest a reconciliation process between stock exchanges and RTAs, which led to the closure of 2.5 million SIP accounts, has contributed to the surge in discontinued accounts. Other factors include investors restructuring their portfolios, switching to larger SIPs, and changes in account modes.
SIP assets under management in India dropped to ₹13.2 trillion in January from ₹13.6 trillion in December. While some fear that continuing closures could cause stagnation, a significant decline to last April’s 87 million accounts is seen as unlikely. This situation is regarded as a natural slowdown following recent bullish trends, with many observers believing the equity market’s instability could last a few more months.
Market expert Trideep Bhattacharya of Edelweiss Asset Management argues that SIP cancellations typically recover in three months and that SIPs provide long-term risk mitigation. The notion that halting SIPs during downturns prevents losses is a myth; in fact, continuing SIPs helps lower risk over time. Jay Kothari from DSP Mutual Fund sees the current market weakness as an opportunity for investors to increase SIP contributions, potentially reaping the benefits of reduced average investment costs through consistent, long-term investments.
Original Source: https://www.livemint.com/mutual-fund/mf-news/sip-systematic-investment-plan-mutual-fund-investments-sip-stoppage-sip-closure-market-correction-sip-returns-nifty-50-11739779832060.html
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Publish Date: 2025-02-17 16:10:00
