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The anxiety due to the recent volatility in the markets has led to an increase in the number of discontinued SIP accounts.
In February, the gap between new SIP accounts and the discontinued SIP accounts doubled to 10 lakh accounts compared to the gap of around 5 lakh in January.
The data shows that the industry added 56.19 lakh new accounts while it saw a discontinuation of 61.33 lakh in January. On the other hand, in February, the industry added 44.56 lakh new accounts and saw discontinuation of 54.70 lakh accounts.
Despite a minor decline in the monthly inflows, the industry saw a discontinuation of 1.40 crore in the last three months (December – 44.912 lakh, January- 61.33 lakh and February- 54.70 lakh accounts discontinued).
By the end of February, the total SIP accounts were at 10.16 crore in February compared to 10.26 crore in January.
Further, the monthly gross SIP inflows came down to Rs. 25,999 crore in February from Rs. 26,400 crore in January.
The industry witnessed a decline in terms of contributing SIP accounts or active SIP accounts. The total number of contributing SIP accounts reduced to 8.26 crore in February from 8.35 crore accounts in January.
However, experts believe that industry should not worry about this rising discontinuation of SIP accounts as this is largely due to reporting errors.
A CEO requesting anonymity said that RTAs have been uploading details of inactive SIP accounts or SIP accounts which remain inactive for the last three months very recently. This wasn’t the case with the reported data earlier.
Harsh Gahlaut, Co-founder and CEO, FinEdge said that the sharp spike in SIP discontinuations is disappointing but not surprising. “Over the past few years, we’ve seen a surge of retail investors entering the markets—largely driven by recent past performance and social media. Unfortunately, many of these investments were made without professional guidance, proper planning, or a clear purpose.”
He said that the industry is witnessing a behavioural fallout—aptly summed up by Warren Buffett: “Only when the tide goes out do you discover who’s been swimming naked.” SEBI data shows that even in bullish phases, 73% of investors do not stay invested for more than two years.
Harsh said, “A key reason for the recent spike is not purely behavioural but structural. For a while now, there’s been a reporting gap in SIP closures, especially from digital transaction platforms where SIP cessations weren’t being accurately captured or passed on to registrar systems. That’s now being rectified.”
Madhu Nair, CEO, Union Mutual Fund said, “Market is always in a bull run for SIP investors. While their investment grows when market goes up, they can accumulate more number of units whenever market goes down.”
Madhu Nair believes that the tax benefits provided in the recent Union Budget will increase disposable income by around Rs. 1 lakh crore. He believes that the monthly inflows through SIPs will go up from the current inflow of Rs. 25,999 crore to Rs. 40,000 crore within the next 18 months to 2 years.
Sharing an idea, he said existing MFDs should reach out to the existing 5 crore investors and ask them to top up their SIPs by Rs. 2,000. This will bring in Rs. 10,000 crore and the rest Rs. 5,000 crore can be received from new investors, said Madhu.
Ravi Kumar Jha, CEO, LIC Mutual Fund feels that 2024 was the year of returns for the mutual funds while 2025 is going to be the year of accumulation of MF units through SIPs (due to correction).
Ravi also said that the volatility is not necessarily a bad sign for SIP investors. During the volatile markets, the investors accumulate extra units that help in their capital appreciation in the longer term, he added.
