MF News SIP discontinuation on a rise

SIP discontinuation on a rise

Net new SIP registrations in December fell to a low of 1.87 lakh.

Team Cafemutual Feb 16, 2019

Discontinuation of Aadhaar authentication has slowed the SIP growth in the mutual funds industry.

While the industry used to add 10 lakh SIPs each month before the SC verdict on Aadhaar, AMFI data shows that the industry had added around 7 lakh SIP accounts each month since November.

In terms of net SIPs, which is new SIP registered minus discontinued SIPs, the numbers are falling even faster. In fact, in December 2018, the industry has added just 1.87 lakh net new SIP accounts, shows a recent AMFI report. Compared to April 2018, the net SIPs declined by 61% to fall to 1.87 lakh in December 2018 from 4.81 lakh in April 2018. Even if we compare to November, the net SIP registrations fell by 39% in December.

Net SIP Registrations (lakh)

Month	Total No. of outstanding SIP Accounts	No. of New SIPs registered	No. of SIPs discontinued	Live SIPs
Apr 18- Dec 18	253.95	85.16	42.67
Dec-18	253.95	7.23	5.36	1.87
Nov-18	252.08	7.58	4.44	3.14
Oct-18	248.94	9.35	4.66	4.69
Sep-18	244.25	10.64	4.79	5.85
Aug-18	238.4	10.7	4.82	5.88
Jul-18	232.52	10.16	6.26	3.9
Jun-18	228.62	10.34	4.52	5.82
May-18	222.8	10.36	3.83	6.53
Apr-18	216.27	8.8	3.99	4.81
Apr 17- Mar 18	211.46	116.41	34.83

Source: AMFI

The SIP discontinuation numbers have also increased in this financial year compared to FY 2017-18. While last financial year recorded SIP continuations of just 34.83 lakh, this year the number has already touched 42.67 lakh in December 2018.

DP Singh, ED & CMO (Domestic) SBI MF attributes the lower numbers to lower appetite for equity investments in the last two months. “With increased market volatility, investors are taking a wait and watch approach. Moreover, the recent Supreme Court ruling disallowing the use of Aadhaar for eKYC has also acted as a deterrent. We have seen a significant drop in SIP numbers from online players,” he added.

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18 Comments

Bhupeshwar Giri · 5 years ago `

If people sitting in AC rooms will make the law without knowing the ground realities, this type of thing will only happen. There are lots of obstacles put in the way of an IFA in name of investors protection. Soon MF industry will go the NPS way.

Krishnan Iyer · 5 years ago `

SIP has become speculative Investment ...it is now cyclical ...unlike structural change to financial assets.

Dixesh shah · 5 years ago `

Aur brokerage ghatao...will stop all...bcz if u cant understand distributor...then they will find their way...

shailendra pote · 5 years ago `

SEBI is full of half-mad people. It and AMFI, both are trying to eliminate distributors as they term us as "Overheads" Shame on both of them!

S P · 5 years ago `

It will be foolish to think that the drastic drop in SIP is because of SC verdict.

The first reason of many is, each and every equity schemes of every MF house are showing negative returns way beyond the Indices have if compared to.

Secondly, some or all fund managers have one or by other way have links to market punters. And to get some heavy passbacks from such notorious punters these fund managers invest hard earned money of the investors to such shares to which no rational fund manager would invest in. Besides, some of them invest in some shares even if they are in high valuation and at the end ends up with selling the same at lower price then the acquisition. Which affects the profitability of the schemes handled by them.

Third biggest reason is due to sebi's changes in rule of having two different way of distributing scheme, i.e., regular and direct

May there might be many other reasons to it but non-authentication of AADHAR couldn't be AADHAR for drastic drop in SIPs and MF investment.

Ajmera · 5 years ago

totally agree with 1st reason. due to negative return..people hesitate to start or increase SIPs. And those who have started 2 years before..they get negative returns and they become impatience now and want to stop SIPs.

Agree with the 3rd reason. direct customer don't have Shrikishna (Advisor) and they started SIPs for short term gain and in SIPs euphoria. Now they realized that SIP is not their cup of tea.

Anil · 5 years ago `

Dear Mr Singh from SBI
Pls when the sip r low u blame market volatility and SC Judgment but don't u take into account due to lower brokerage the Distrubuters r getting and tell that this also is the reason

Sanjay Jotwani · 5 years ago `

The fall in mutual fund business is having a direct relation to distributor commission.

B S Thakur · 5 years ago `

there is no any reason of SIP discontinuation numbers...abhi to picture suru hui hai mere bhai ,Aur brokerage ghatao...will stop continue all ...bcz if u cant understand distributor problem, bcz distributor are the key of MF industry.

B S Thakur · 5 years ago `

praveen · 5 years ago `

People are more wise investing through distributors learning every ting den simply switching direct ...IFA situation really tuff ....time waste,energy,resource...everthing smash... Fee model is not work out in 2nlevel cities n towns ...ppl are crying to give atleast photocopy(Xreox) money...If any one encourage you to fee model with example showing (Doctors fee based business model) dats really shit...it does not work in dis society...

SUBHASH panicker · 5 years ago `

Do not understand HOW a financial services article, in a financial publication, attributes decline in SIPs to the SC judgement on Aadhar based eKYC. Shows poor analytical understanding.
The basis of reaching such a conclusion is not stated. Nor are relevant data shown to establish a clear correlation.

Correlating a statistical point with unproven unresearched data, demonstrates poor understanding of customer behavior in financial investments.
Cafe Mutual articles should not attempt to, match the general purpose media, by sensationalising or making controversial inferences.

Your team or the editor diminish their credibility, by starting an article, with a statement like - "Discontinuation of Aadhaar authentication has slowed the SIP growth in the mutual funds industry ".

Expect more responsible and credible financial services writing, from a publication like Cafe Mutual, which is read mostly by people in the financial services business.

Hope you take the feedback.

Vishal Rastogi · 5 years ago `

Samay rathe jag jaye toh kal ka savera bhi dekh leta hai, par agar andhera hone ka intezar karo toh kal muskil se hi milta hai..............yani jab saaren aache IFA dusre alternative men shift kar lenge tab kuch karenge kya ?

BISHNU KUMAR AGARWALLA · 5 years ago

Arreyy Sirji, inko IFAs se kya matlab h..... Inka toh alternate channels h na, jaise ki banks, corporates, brokers, isiliye toh... inki aankhon main IFAs khatak rahe h or q ki yeh log directly IFAS ko nikal nahin pa rahe h.... indirectly naya naya aisa kuch kar rahe h ki...... humlog khud samajh jaaye. IFAS samajhdaar hote h na, bs isaara hi kaafi h.... (mujhe to lagta h.... yeh sab banks , corporates etc. or amfi or sebi ki mili bhagat h..... IFAS ke khilaaf

Deepak T Bajaj · 5 years ago `

Stopping of SIP is not at all linked with Adhaar formalities changed again, The impact of falling market returns in Mutual fund schemes is the basic reason , and SEBI s distribution channel of regular and Direct , is in the scene over here , as those investors who have come in Direct channel ....are not educated enough to understand Mutual funds risk apettite , and short term mindset to double money, and entered by selecting the highest return funds on ranking basis which keeps on changing...,are running out of the investment game ,from SIP , on other hand the investors who have come in regular channel where they have advisor , who has briefed them for long term goals, and as per their risk profile, the appropriate fund schemes have been selected and sip started, and on top of that in volatile situation investor has advisor holding his hand and giving clarity on situation and keeping investor reminded of his long term sip goals ,Advisor make sure Sips continue.
Mutual fund Industry earns because of Advisors working ,and it is never question of brokerage being burden to investor....it's the fees truly deserved by Advisor.
May the light be seen by AMCS and SEBI in this situation and do needful to support Advisor role with proper brokerage due to Advisors

Kaushik Halai · 5 years ago `

Discontinuation of equity Sip is due to mis -selling based on past returns, any sip has to at least run for 8 to 10 years with out been discontinued or redemption of part amount for good returns.
Direct investors also don’t understand the concept

mahesh kumar sahoo · 5 years ago `

are baba yea sab Hora fr life insurance product business no upfront commission no work lic giving us 35% first year then 7.5% imidiate reach why wait fr trail no will stay fr 20 years sebi chores

Rajesh sharm · 5 years ago `

This decline in SIP is because of new commission structure.after 22 october SEBI eliminated upfront commissions hence no IFA is willing to work anymore.
1-1.5% is nothing for service given by distributor but even that was stopped by SEBI
Other side insurance sector pays 15-30% commissions but SEBI finds no problem in that.
Worst decision

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