SIP discontinuations drop to 11-month low in May

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Systematic investment plans (SIPs) a smart, hassle-free method of investing preferred by many for investing a fixed sum in a mutual fund scheme is out of the woods. Since the outbreak of Covid last year many mutual fund investors had either paused their SIPs or withdrew their investments to meet their financial obligations. However, with the steady decline in Covid case in the previous month, lifting of lockdown restriction and hopes of a quick economic revival saw investors opening their piggy bank for investing in mutual funds.

SIPs contribution hit lifetime highs

According to data released by the Association of Mutual Funds in India (AMFI) the SIP contributions hit lifetime high of Rs 8,818.90 crore in May 2021 versus Rs 8596.25 crore witnessed in April 2021. The March 2021 SIP contribution of Rs 9,182 crore which was higher owing to the weekend dawning at the end of February the rollover of Rs 495-500 crore of February is reflected in March 2021.

“Low-interest rates are driving money into asset classes that beat inflation. Given the current trend as well as the levels of the market, there is a prudent investing strategy by way of SIP in order to average the price of investing,” explained Priti Rathi Gupta, Founder, LXME and MD of Anand Rathi.

SIP accounts

The number of individuals investing in SIPs were also encouraging as the month of May saw net additions of 8.82 lakhs accounts taking the tally of accounts to 3.88 crore in May 2021 from 3.79 crore accounts in April 2021.

The number of SIP accounts that were discontinued or whose tenure was completed for the month of May stood at 6.66 lakhs lowest since June 2020. For the entire financial year, 2021 SIP accounts that were discontinued or whose tenure got completed was 86.03 accounts bringing the average monthly run rate of 7.17 lakh account.

The primary reason for the number going down is due to the ongoing bull run in the market. Financial pundits are of the opinion that the sharp surge in the markets the long-term returns of the markets have also improved-prompting investors to stay invested.

In May, equity funds saw net inflows came in at a 14-month high of Rs 10,083 crore, continuing its three-month positive streak and back to pre-covid levels.