Modest rise in net SIP inflows as redemptions jump 54%

Net SIP inflows up 4.9%, even as gross collections rise 28%

Even as gross inflows through the systematic investment plan (SIP) route rose 28 per cent in 2023-24 (FY24), net SIP inflows grew by a modest 4.9 per cent owing to a sharp jump in redemptions.

Mutual funds (MFS) raked in ~87,971 crore net SIP inflows in FY24 compared to ~83,873 crore in 2022-23 (FY23).

During the year, gross inflows rose 28 per cent from ~1.6 trillion to ~2 trillion, while redemptions from SIP accounts went up 54 per cent from ~72,100 crore to ~1.1 trillion, according to data from the Association of Mutual Funds in India (Amfi).

Redemptions from equity schemes were elevated during some phases of FY24 as investors booked profits after an extended run-up in stock prices. Between April 2023 and July 2023, outflows amounted to 80 per cent of gross inflows in equity schemes.

According to MF executives, the surge in both gross investments and redemptions also shows that investors are churning their portfolios.

In FY24, 42.8 million SIPS were registered, 71 per cent higher than in FY23.

At the same time, they closed 22.4 million SIP accounts, 56 per cent higher than in FY23.

“SIPS have grown by leaps and bounds in the past few years, largely due to an increase in ease of investment, increased awareness, and market rally. However, the ease of opening and closing SIP accounts could have led to higher churn as investors move in and out of different schemes. Ideally, investors should stick to their SIPS for the long term, but as long as they are committed to investing in MFS through SIPS, especially during market downturns, it’s not much of an issue,” said Mayukh Datta, chief business officer, ITI MF.

In a report on Tuesday, Amfi said that MFS witnessed a record surge in assets under management (AUM) in FY24 owing to strong inflows and mark-to-market gains. The association noted that retail investors —who prefer investing through the SIP route — have played a pivotal role in driving the growth, particularly in equity, hybrid, and solution-oriented schemes, which collectively accounted for nearly 58 per cent of industry assets and 80 per cent of folio count.

“This underscores the increasing participation of households in the capital markets through MFS,” it said.

The MF industry added nearly ~14 trillion to its AUM in FY24 on account of a sharp rally in equities, coupled with strong inflows.

The benchmark indices — National Stock Exchange Nifty 50 and S&P BSE Sensex — surged over 25 per cent in FY24. The broader market Nifty Smallcap 100 and Nifty Midcap 100 gained by 70 per cent and 60 per cent, respectively.

Equity-oriented active schemes witnessed substantial growth of 55 per cent during FY24 with AUM reaching ~23.5 trillion.

In FY24, the flexicap category emerged as the largest fund category, closely followed by largecap funds, with multicap funds experiencing the highest percentage growth at 85 per cent, according to Amfi.