SIP inflow finally conquers Mount 20K in April 2024

22 May 2024 , 08:42 PM

APRIL 2024 SIP FLOWS – DECISIVELY HIGHER

If there was disappointment in March 2024 for not being able to cross the ₹20,000 Crore SIP flow landmark, that distinction was achieved in April. To be fair, there were a slew of holidays in March, resulting in many of these SIP investments being carried forward to April. For the month of April 2024, gross SIP flows touched ₹20,371 Crore; obviously an all-time record for monthly SIP flows. For FY24, the total SIP flows had fallen just short of the ₹2 Trillion mark, but was still a good 27.73% higher than the total SIP flows in FY23. The month of April 2024 saw overall mutual fund AUM rising from ₹53.40 Trillion to ₹57.26 Trillion. However, that was largely driven by frenetic flows into debt funds and index rally.

The month of April 2024 has seen several records on the SIP flow front. It crossed the ₹20,000 Crore mark for the first time ever. The month of April also saw a record 63.65 Lakh new SIP folios registered at a gross level. Even the net accretion in SIP folios in April 2024 was the highest in the last 1 year at 30.40 Lakhs. The SIP AUM that had just crossed the ₹10 Trillion mark in January 2024 has now touched a new high of ₹11.26 Trillion as of the end of April 2024. 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, but it was also due to the frenetic growth in SIP flows. If you look at the last one year between April 2023 and April 2024, the SIP AUM has grown by 57.02% from ₹7.17 Trillion to ₹11.26 Trillion. In short, SIPs have been the triggers or rather the swing factors in the sharp growth in mutual fund AUM and mutual fund folios.

QUICK DETOUR – APPLYING THE 15-15-30 RULE

One of the thumb rules in understanding the power of compounding in mutual funds is the 15-15-30 rule. It says that if you can invest a sum of ₹15,000 consistently each month in an equity fund giving CAGR returns of 15% annualized, then in 30 years, this corpus grows to ₹10.50 Crore. That is estimated to be the approximate amount that can give you a comfortable retirement. You just need any basic SIP calculator to tell you that if you invest ₹15,000 per month at 15% CAGR for 30 years it grows to ₹10.50 Crore. How does it happen in a gradual manner?

Details	5-Years	10-Years	15-Years	20-Years	25-Years	30-Years
Monthly SIP	15,000	15,000	15,000	15,000	15,000	15,000
Total Outlay	9,00,000	18,00,000	27,00,000	36,00,000	45,00,000	54,00,000
CAGR Yield	15.00%	15.00%	15.00%	15.00%	15.00%	15.00%
Value	13,45,225	41,79,859	1,01,52,946	2,27,39,325	4,92,61,106	10,51,47,309
Return	4,45,225	23,79,859	74,52,946	1,91,39,325	4,47,61,106	9,97,47,309
Wealth Ratio #	1.49X	2.32X	3.76X	6.32X	10.95X	19.47X

(# – Wealth Ratio is the ratio of Value to Total Outlay)

The above numbers demonstrate why 15-15-30 rule works so well in later years.

• The above principle has allowed the investor to grow an investment of ₹54 Lakhs over 30 years into a healthy corpus of ₹10.51 Crore. What is more interesting is how was the wealth creation distributed at various milestones.
• At the end of 10 years, just about 3.97% of the total corpus was accumulated. At the end of 20 years, just about 21.63% of the total corpus has been created. That means nearly 80% of the total corpus was just created in the last 10 years.

The next time you wonder about the magic of SIPs, remember, the 15-15-30 rule and the effect of compounding, the late surge says it all.

APRIL 2024 SIP FLOWS AT RECORD ₹20,371 CRORE

Since June 2023, the SIP flows have created new records each successive month. In fact, if you just compare the April 2024 SIP flow with the April 2023 SIP flow, it is higher by 48.39%. More importantly, even as the gross SIP flows are growing, it is happening with a lower stoppage ratio. This shows that more money is staying back in the SIPs. In short, the net impact of SIP flows is much more that what this gross growth number shows on SIPs.

Monthly MF Data	Monthly SIP Inflows (₹ Crore)
Apr-23	13,728
May-23	14,749
Jun-23	14,734
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

Data Source: AMFI

SIP flows were expected to cross ₹20,000 Crore in March 2024, but that was nixed by two factors. Firstly, there was caution at higher levels of the Nifty and Sensex, leading to FPI outflows. Secondly, there were a string of holidays in late March resulting in investment plans getting carried forward. Not surprisingly, April 2024 saw the gross SIP flows finally touching the ₹20,371 mark. However, what is working for SIPs is the momentum thrust from Gen-X and Gen-Z customers. As the purchasing power of the young population grows, SIP flows can only get better from here.

SIP FLOWS – THE 8-YEAR STORY

The table below captures month-wise SIP flows into mutual funds since April 2016. Each milestone of an additional ₹1,000 Crore is a significant progress. This is the ninth year.

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		15,245	12,140	9,609	7,831	8,324	7,554	4,947	3,334
Jun		14,734	12,276	9,156	7,917	8,122	7,554	4,744	3,310
May		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. FY24 was the best year in terms of milestones, with 5 milestones, compare to 3 milestones in FY22 and in FY18. The number of milestones is a good proxy for the market undertone, although we must also start providing for the size effect.
19. What was the average gap between two milestones? A quick ballpark figure is 3-6 months, although is about 2 months in FY24. If you compare the April numbers of the last 8 years, SIP flows YOY are up 6.52X in the last 8 years.
20. Incidentally, the longest wait between two milestones 27 months between December 2018 and March 2021. However, this large cap could be attributed to the disruption caused by COVID and the after effects.

With SIP flows of ₹20,000 Crore crossed in April, it remains to be seen how much higher the SIP flows for FY25 turn out to be. We will need more data points in FY25 for a clear picture.

WHAT WE READ FROM THE SIP TICKET STORY?

If FY23 was great for SIP flows, FY24 was even better. At ₹1,99,219 Crore, FY24 was the best full year in SIP collections. SIP flows in FY24 are 27.73% higher than FY23; 59.93% higher than FY22 and 107.35% higher than FY21. If you annualize 1-month data of FY25, the current year could be 22.71% over FY24, but that is just too much of extrapolation.

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	₹244,452 Crore	₹20,371 Crore	22.70%

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 quite understandable. FY20 and FY21 were more the exceptions than the rule.

SIP FOLIOS IN APRIL 2024 – DID THEY PASS THE RETAIL LITMUS TEST

At the outset, there is pressure on new SIPs registered. From 51.84 Lakh fresh SIP registrations in January 2024, it fell to 49.80 Lakh in February 2024 and further to 42.87 Lakhs in March 2024. April 2024 simply bucked that trend with 63.65 Lakh new SIPs registered, an all-time record. Investors still appear to be positive on the India story, irrespective of Nifty and Sensex levels. How did SIP folio story pan out in April 2024? The number of SIP folios increased from 839.71 Lakhs in March 2024 to 870.11 Lakhs in April 2024; an effective monthly net accretion of 30.40 Lakh SIP folios or 3.62%. SIP folios are unique to an AMC, but not about unique customers. For instance, while there are 18.15 Crore mutual fund folios in India, there are only 4.60 Crore unique customers as identified by PAN. SIP folios, are still, the best approximation for retail participation in mutual funds. SIP folios at 870.11 Lakhs is 47.95% of the total SIP folios in India.

What about SIP AUMs on a yoy basis? Between March 2024 and April 2024, the SIP AUM surged from ₹10,71,666 Crore to ₹11,26,129 Crore; a surge of 5.08% over March 2024 SIP AUM. The next target is ₹20 Trillion SIP AUM mark, while the monthly SIP flows are set to touch ₹30,000 Crore; which should be doable in the next one year.

SIP STOPPAGE RATIO – STILL STAYS ABOVE 50

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. Now SIP stoppage ratio is the ratio of SIP accounts discontinued to new SIP accounts opened. Lower the SIP Stoppage Ratio, the better it is. In January and February 2024, SIP stoppage ratio fell below 50% mark for first time in FY24; but March 2024 saw a bounce in the SIP stoppage ratio back to above 50 levels.

Apr-23	May-23	Jun-23	Jul-23	Aug-23	Sep-23
67.54%	57.45%	54.93%	54.14%	54.54%	56.27%
Oct-23	Nov-23	Dec-23	Jan-24	Feb-24	Mar-24
50.69%	54.19%	51.60%	45.89%	42.83%	54.40%
SIP Stoppage Ratio for April 2024 stands at 52.24%

Data Source: AMFI

Apparently,  after starting off at an elevated SIP stoppage ratio at 67.54% in April 2023, the SIP stoppage ratio trended lower to 42.83% in February 2024, before recording a year-end surge in the SIP stoppage ratio to 54.4% in March 2024. For the first month of FY25 (April 2024), the SIP stoppage ratio is at 52.24%, almost at par with the FY24 average. Since monthly figures of SIP stoppage ratio are quite erratic, let us move to the annual figures.

ANNUAL SIP STOPPAGE VOLATILE SINCE THE PANDEMIC?

Here is the SIP stoppage ratio in last 5 fiscal years with the updated SIP stoppage ratio for the 12 months of fiscal year FY24.

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%	52.24%

Data Source: AMFI (# 1-month data annualized)

The SIP stoppage ratio for FY24 at 52.41% was lower than FY23 and the pandemic years, but sharply higher than FY22. The FY24 SIP stoppage ratio is almost at par with FY23, but that is one-month data annualized, so it may not be too representative. Is there anything like an ideal stoppage ratio range? The preferred range for SIP stoppage ratio would be in the range of 40% to 45%. That was achieved in some months, but is yet to be achieved on a full year cumulative basis. India’s GDP surge from the current $3.6 Trillion to $5.2 Trillion by 2028 will unleash a massive spree of consumption savings and investment. This will combine with the financialization of savings and a massive youth population entering the work force. Notwithstanding the level of SIP stoppage ratio, the growth momentum is going to be very robust. At 4.6 Crore unique investors, mutual fund SIPs have just scratched the surface. The best is, surely, yet to come.