Record SIP closures in Dec amid market volatility; inflows stay strong

Investors open 5.4 million accounts, close 4.5 million last month

Investors are shutting down mutual fund (MF) SIP accounts at a record pace amid mounting equity market volatility. In December, 4.5 million SIP accounts were discontinued — the highest number ever recorded.

 

The previous record of 4.4 million closures was set in May 2024.

 

Despite the closures and market correction, SIP inflows remain unaffected. In December, investors poured in a record Rs 26,459 crore into MF schemes via SIPs.

 

The surge in account closures has weighed heavily on the net addition of active SIP accounts, with the industry adding only 0.9 million accounts in December, the lowest in seven months.

 

 

“With the market turning volatile, investors who are new to equity investing could have felt a bit jittery. As a result, the closures may have gone up,” said Anand Varadarajan, chief business officer at Tata Asset Management.

 

The benchmark Nifty 50 index ended December in the red, marking its third consecutive monthly decline. The index dropped 2 per cent last month and has fallen over 10 per cent from its all-time high in September.

 

The rising base of SIP accounts, according to experts, is another factor contributing to the growing number of closures. 

 

SIP data is often regarded as a key indicator of retail investor behaviour, given that systematic investment plans are predominantly used by individual investors.

 

While closures have surged, the opening of new SIP accounts has slowed after peaking at 7.3 million in July 2024. In December, 5.4 million new SIPs were registered.   

 

For the whole of 2024, active SIP accounts rose by 26.8 million to 103 million, compared to an addition of 15.1 million accounts in 2023. The growth in account openings was driven by increased new investor participation, strong performances across asset classes, and record-breaking new fund offerings (NFOs). 

 

Last year, mutual funds launched 70 active equity schemes, most of them focused on sectoral and thematic investments. On the passive front, 130 schemes were introduced. 

 

SIP inflows have become a vital support for the equity market, which has faced sustained selling pressure from foreign investors in recent months. Equity mutual fund schemes attracted a net Rs 3.9 trillion in 2024, pushing mutual fund equity buying past Rs 4 trillion for the first time.

 

Mutual funds emerged as the largest institutional buyers in the equity market in two of the past three years — 2022 and 2024. In 2023, they narrowly trailed foreign institutional investors.