SIP flows take big leap in July 2024 to ₹23,332 Crore

11 Aug 2024 , 05:14 PM

JULY 2024 SIP FLOWS – WHAT TIME 25K?

About a year back, had you spoken about monthly SIP flows of ₹25,000 Crore, it would have sounded too ambitious, even arrogant. With the July 2024 SIP flows at a record high of ₹23,332 Crore, the 25K target is not too far off. In fact, if you look at the first our month of FY25, the average SIP flows per month has been of the order of ₹21,467 Crore. In short, FY25 promises to be another robust and record year for SIP flows, but more on that later. SIP flows in July 2024 at ₹23,332 Crore were 9.73% higher than the sequential June 2024 SIP inflow. The month of July 2024 saw overall mutual fund AUM rising to ₹64.97 Trillion from ₹61.16 Trillion at the end of June 2024. Of course, the AUM accretion is a mix of inflows and price appreciation, but that only applies to equity based assets. For pure active debt funds, the growth has entirely come from flows in July 2024. The new fund offerings at a robust ₹16,565 Crore also helped in a slew of new SIP creations.

GROSS VERSUS NET ACCRETION TO SIP FOLIOS

The month of July 2024 saw gross SIP inflow over ₹20,000 Crore for the fourth month in a row and this is despite the uncertainties in the Union Budget over capital gains taxation. There were apprehensions that the higher capital gains tax on equity mutual funds would impact the SIP flows; but no such trend visible even in the last week of July 2024. The gross accretion to folios at 72.62 Lakhs in July 2024 was sharply higher than 55.13 Lakhs in June 2024, at 49.74 Lakhs in May 2024, and 63.65 Lakhs in April 2024. However, the net accretion in SIP folios in July 2024 was an all-time record at 35.29 Lakhs. This hiatus was on account of the relatively lower SIP closures in July, compared to the previous months of FY25. The SIP AUM in July 2024 has touched a new high of ₹13.09 Trillion. Between FY22 and FY23, the SIP AUM grew by just about 18.55%, while the SIP AUM growth between FY23 and FY24 was an impressive 56.84%. That can be attributed to the rally in the index, and that trend appears to be continuing in July 2025 also. In fact, the SIP AUM as of the close of July 2024 is already 22.12% higher than the SIP AUM as of the close of FY24.

SIPS DETOUR – WILL THE HIGHER LTCG TAX HIT SIP ACCUMULATION?

The full budget presented by the finance minister on July 23, 2024, raised the long term capital gains tax no equities from 10% to 12.5%. Even the annual exemption limit on long term capital gains was raised to ₹1.25 Lakhs. Does this really make a difference to your SIP accumulation? Let us understand this with a real life example.

Pre Budget	Amount	Post Budget	Amount
Tax Rate (including Cess)	10.40%	Tax Rate (including Cess)	13.00%
Monthly SIP	₹5,000	Monthly SIP	₹5,000
Tenure of SIP	20 Years	Tenure of SIP	20 Years
CAGR Returns	13%	CAGR Returns	13%
Total Investment	₹12,00,000	Total Investment	₹12,00,000
Final Value	₹57,27,596	Final Value	₹57,27,596
Capital Gains	₹45,27,596	Capital Gains	₹45,27,596
Exempt LTCG	₹1,00,000	Exempt LTCG	₹1,25,000
Capital Gains Tax	₹4,60,470	Capital Gains Tax	₹5,72,337
Post Tax Gains	₹40,67,126	Post Tax Gains	₹39,55,259
Post Tax CAGR Yield	10.46%	Post Tax CAGR Yield	10.25%

What is our key reading from the above table. In the above case, if you consider the post budget treatment of tax gains at a higher rate of 12.5% plus 4% cess (totalling to 13%), then the eventual difference in post-tax CAGR returns is just about 21 bps. That is not something that is largely enough to dissuade you from pursuing your SIPs.

There is one important point to understand here. We have assumed that the entire gains are booked at the end of 20 years, so the additional benefit of ₹1.25 Lakhs is only available once at the end of the tenure. However, a better and smarter way to do this would be to take out profits in a phased manner so that each year you get the benefit of exempt capital gains tax. If that facility is well utilized, the higher capital gains tax really would not matter to your eventual CAGR returns.

JULY 2024 SIP FLOWS AT RECORD ₹23,332 CRORE

Since June 2023, the SIP flows have created new records each successive month. While the degree of accretion may have varied, each month has seen higher SIP inflows than the previous month in the last one year. This kind of decisive positive trend has never been seen in the last 8 years, and it is a clear indication that SIP flows are here to stay for the long haul. In fact, if you just compare the July 2024 SIP flow with the July 2023 SIP flow, it is higher by 53.05% yoy. The good news is that, unlike the month of May 2024, the SIP closures have been relatively lower in July, so the net accretion to SIP flows have been genuinely better in the current month. We shall look at the SIP closure analysis separately later.

Monthly MF Data	Monthly SIP Inflows (₹ Crore)
Jul-23	15,245
Aug-23	15,814
Sep-23	16,042
Oct-23	16,928
Nov-23	17,073
Dec-23	17,610
Jan-24	18,838
Feb-24	19,187
Mar-24	19,271
Apr-24	20,371
May-24	20,904
Jun-24	21,262
Jul-24	23,332

Data Source: AMFI

Gross SIP flows into mutual funds have now been above the ₹20,000 Crore mark for the fourth month in a row with the average of FY25 at ₹21,467 Crore. What has actually favoured these SIPs is the momentum thrust from Gen-X and Gen-Z customers with their rising purchasing power and growing surpluses. More importantly, these young investors appreciate the importance of methodical financial planning and SIPs fit into the financial planning story like  T. In the 4 years since the COVID lows, it is not just the SIP AUM, but even the SIP folios that have grown at a geometric rate.

SIP FLOWS – EIGHT YEAR STORY GETS MORE INTERESTING

The table below captures month-wise SIP flows into mutual funds since April 2016. Each milestone of an additional ₹1,000 Crore has been highlighted in bold.

Month	FY25	FY24	FY23	FY22	FY21	FY20	FY19	FY18	FY17
March		19,271	14,276	12,328	9,182	8,641	8,055	7,119	4,335
February		19,187	13,686	11,438	7,528	8,513	8,095	6,425	4,050
January		18,838	13,856	11,517	8,023	8,532	8,064	6,644	4,095
December		17,610	13,573	11,305	8,418	8,518	8,022	6,222	3,973
November		17,073	13,306	11,005	7,302	8,273	7,985	5,893	3,884
October		16,928	13,041	10,519	7,800	8,246	7,985	5,621	3,434
September		16,042	12,976	10,351	7,788	8,263	7,727	5,516	3,698
August		15,814	12,693	9,923	7,792	8,231	7,658	5,206	3,497
July	23,332	15,245	12,140	9,609	7,831	8,324	7,554	4,947	3,334
Jun	21,262	14,734	12,276	9,156	7,917	8,122	7,554	4,744	3,310
May	20,904	14,749	12,286	8,819	8,123	8,183	7,304	4,584	3,189
April	20,371	13,728	11,863	8,596	8,376	8,238	6,690	4,269	3,122

Data Source: AMFI

Here are some key takeaways from the 8-year SIP flow numbers.

18. The previous fiscal year of FY24 was the best full year in terms of milestones, with 5 milestone months. This compares to 3 milestones in FY22 and in FY18. In FY25, we already have 3 milestones in 4 months. Also, the actual gap between July 2024 and June 2024 in terms of quantum of SIP flows is the highest ever.
19. What was the average gap between two milestones? A quick ballpark figure is 3-6 months, although is just 2 months in FY24 and under 2 months in FY25, till date. If you compare the July 2024 numbers with the July 2016 SIP flow numbers, it is up by a whopping 7.00X times.
20. Incidentally, the longest wait between two milestones of 27 months was between December 2018 and March 2021. This was an exception as this period represented the period of post pandemic uncertainty. Otherwise, through high inflation and global recession fears, the SIP flows continued to remain robust.

With average SIP flows at ₹21,467 Crore in FY25, a logical figure to target in the first half of FY25 would be ₹25,000 Crore SIP flows per month. That is not entirely inconceivable.

HOW WE INTERPRETED THE SIP TICKET STORY?

If FY23 was great for SIP flows, FY24 was even better and FY25 has started with a big bang. At ₹1,99,219 Crore, FY24 was the best full year in SIP collections. SIP flows in FY24 were 27.73% higher than FY23; 59.93% higher than FY22 and 107.35% higher than FY21. If you annualize 4-month data of FY25, the current year could be 29.31% better than FY24. It could even get a lot better than that.

Financial Year	Gross Annual SIP flows (₹ Crore)	Average Monthly SIP Ticket (AMST)	YOY Accretion in (%)
FY16-17	₹43,921 Crore	₹3,660 Crore
FY17-18	₹67,190 Crore	₹5,600 Crore	53.01%
FY18-19	₹92,693 Crore	₹7,725 Crore	37.95%
FY19-20	₹100,084 Crore	₹8,340 Crore	7.96%
FY20-21	₹96,080 Crore	₹8,007 Crore	-3.99%
FY21-22	₹124,566 Crore	₹10,381 Crore	29.65%
FY22-23	₹155,972 Crore	₹12,998 Crore	25.21%
FY23-24	₹199,219 Crore	₹16,602 Crore	27.73%
FY24-25	₹257,607 Crore	₹21,467 Crore	29.31%

Data Source: AMFI

If you look back at the yoy growth in the average monthly SIP ticket (AMST), the growth has been robust each year, except for the 2 years of the pandemic, which is understandable. However, these so-called lost years also laid the foundations for frenetic future growth in SIP flows. In fact, from the post-SIP period, the monthly average SIP flows are up 2.5 times.

SIP FOLIOS IN JULY 2024 – HOW STRONG WAS RETAIL INTENSITY?

The good news is that the gross accretion to SIP folios and the net accretion to SIP folios were at a record level in July 2024. In FY25, April 2024 saw a robust 63.65 Lakh new SIPs registered; but May 2024 fell to 49.74 Lakhs, although June has bounced back to 55.13 Lakhs. July saw record gross SIP folio addition of 72.62 Lakhs. How did the cumulative SIP folio story pan out in July 2024? The number of SIP folios increased from 898.67 Lakhs in June 2024 to 933.96 Lakhs in July 2024; an effective monthly net accretion of 35.29 Lakh SIP folios or 3.93%. The SIP stoppage ratio has tapered in July 2024, compared to the spike in May; although sobering was visible in June 2024 itself. SIP folios are unique to an AMC, but not unique to customers. For instance, while there are 19.84 Crore mutual fund folios in India, there are only 5.10 Crore unique customers as identified by PAN. SIP folios at 933.96 Lakhs is 47.07% of total mutual fund folios as of the close of July 2024.

What about SIP AUMs on a yoy basis? Between June 2024 and July 2024, the SIP AUM increased from ₹12,43,792 Crore to ₹13,09,385 Crore; a surge of 5.27% on MOM basis. To a large extent this has been triggered by higher flows, although the index levels have only moved up marginally in the month of July 2024. That is one of the reasons, SIP intensity is better captured by the SIP folios than by SIP AUM.

SIP STOPPAGE RATIO – RECOVERY AFTER MAY SHOCKER

AMFI reports monthly SIP flows on a gross basis and not on a net basis. That gap is largely explained by the SIP stoppage ratio. The SIP stoppage ratio is the ratio of SIP accounts discontinued to new SIP accounts opened. Lower the SIP Stoppage Ratio, the better; as it shows more stickiness in the SIP accounts. Between April 2024 and May 2024, there was a sharp spike in the SIP stoppage ratio, which also distorted the FY24 SIP stoppage ratio. However, that looked like a one-off due to the heightened election-related uncertainty and the SIP stoppage ratio has progressively tapered in June and July 2024.

Apr-24	May-24	Jun-24	Jul-24	FY24 #
52.24%	88.38%	58.68%	51.40%	60.91%

Data Source: AMFI (# – 4-months data)

After closing FY24 with SIP stoppage ratio of 52.41%, April was flat at 52.24%, but May was a shocker at 88.38%. The SIP stoppage ratio later tapered to 58.68% in June 2024, and further to 51.40% in July 2024. However, monthly figures of SIP stoppage ratio are quite erratic, as we have seen in the last 4 months. Let us now turn to the annual SIP stoppage ratios for the last 5 years, to get a more secular picture. We will also look at the cumulative SIP stoppage ratio for FY25 for the four months for which data is available with us.

ANNUAL SIP STOPPAGE RATIO STILL ELEVATED

Here is the SIP stoppage ratio in last 5 completed  fiscal years and for the 4 months of FY25.

FY 2019-20	FY 2020-21	FY 2021-22	FY 2022-23	FY 2023-24	FY 2024-25 #
57.84%	60.88%	41.74%	56.94%	52.41%	60.91%

Data Source: AMFI (# 4-months data)

The SIP stoppage ratio for FY24 at 52.41% was lower than FY23 and the pandemic years, but sharply higher than 41.74% in FY22. While FY25 started steady in April, it spiked sharply in May due to election uncertainty. Even after the risk tapering in June and July 2024, the annualized SIP stoppage ratio for FY25 still stands elevated at 60.91%.

Is there something like an ideal SIP stoppage ratio range? It would be advisable as long as the SIP stoppage ratio stays between 40% and 45%. The big surge in GDP growth and consumption in India, along with a steady rise in per capita income levels, will be a boost for financialization of savings. Nothing would reflect that trend better than the growth in SIPs. However, for the SIP journey to be fruitful and meaningful, it is essential that the SIP stoppage ratio is kept at a much lower level.