Strong rebound on D-Street fails to push growth in SIP accounts

The current rally in the benchmark equity indices after a sharp fall in March is yet to result in a recovery in the SIP book. In July, 7.2 lakh SIP accounts were discontinued, the highest in any month since April 2016, when the Association of Mutual Funds of India (AMFI) started disclosing the data. The number of discontinued accounts has been rising for the past three months.

The pace in new SIP accounts improved marginally to 11 lakh in July from 9.1 lakh in the previous month. But, higher discontinuation reduced the overall monthly growth in the outstanding SIP accounts to 1.2 per cent in July 2020 compared with the four-year average of 2.4 per cent.

As a result, the ratio of discontinued SIPs and the new SIPs – the discontinuance ratio – remained elevated. It reached 65 per cent in July 2020 compared with the 52-month average of 50 per cent. The total outstanding SIP accounts stood at 3.3 crore at end of July 2020 accounting for 35 per cent of the total industry folios.

The sales head of a leading asset management company attributed the trend to the rising risk averseness of investors who prefer to retain cash amid economic uncertainties.

The average investment per SIP account dropped to Rs 2,392 in July 2020, the lowest so far. Total SIP investments dropped to 23-month low Rs 7,831 crore. The total value of assets under management (AUM) linked to the SIP accounts was Rs 3.2 lakh crore, accounting for 11.8 per cent of the total AUM of the mutual fund industry.