Net SIP Inflows' Decline Does Not Worry DSP MF's Parekh | The Mutual Fund Show

The mutual fund industry celebrated record inflows through systematic investment plans, or SIPs, in May—an 11-month record streak. But, the net inflow into mutual fund schemes through this route is less than half of what was received on a gross basis, according to data released by the Association of Mutual Funds in India.

In May, the mutual fund industry got gross inflows through SIPs worth Rs 20,904 crore, Venkat Chalasani, chief executive officer of the industry body told reporters on Monday. The net inflow during the month stood at Rs 9,226 crore.

A similar trend played out in the previous month, when gross inflows through SIPs stood at Rs 20,371 crore and net inflows at Rs 8,660 crore.

Net SIP inflows account for cancellation and stoppage of SIPs. Here’s an illustration of this: the total number of SIP accounts stood at 8.76 crore by the end of May, higher by about 5.78 lakh from the previous month. A total of 49.74 lakh SIP accounts were started in May, which means there were cancellations and stoppages of as many as 43.96 lakh accounts. The trend for the previous months are similar. But, is it a cause for concern?

“This data has been there forever,” said Kalpen Parekh, managing director and chief executive officer of DSP Mutual Fund, on NDTV Profit’s The Mutual Fund Show. “When you see the net numbers close to Rs 8,000-9,000 crore, there are some old SIPs that are completing their tenure.”

Investors can cancel or stop their SIPs for a variety of reasons, the most simple of which is that they have simply completed their term, he said.

The ratio of gross-to-net SIP inflows has always been around 40-50%, Parekh said, adding that this is "business as usual" and that there is nothing unusual to be read into it.

SIPs form a significant portion of domestic inflows, which have in turn formed a solid bedrock for the Indian equity market. This has resulted in Dalal Street being relatively insulated from global shocks and wholesale selling by foreign institutional investors.

A bulk of SIP inflows have flowed—and continue to flow—into equity mutual fund schemes. Currently, according to AMFI, 82% of SIP accounts are in such schemes.