Investors are closing mutual fund (MF) SIP accounts at a record pace as equities market volatility rises. In December, 4.5 million SIP accounts were closed, the largest amount ever reported.
The previous record, 4.4 million closures, was established in May 2024.
Despite the closures and market drop, SIP inflows are unchanged. In December, investors pumped a record Rs 26,459 crore into mutual fund schemes through SIPs.
The spike in account closures has had a significant impact on the net addition of active SIP accounts, with the sector adding only 0.9 million accounts in December, the lowest total in seven months.
"With the market turning unpredictable, individuals who are new to equities investment may have felt nervous. As a result, closures may have increased," said Anand Varadarajan, chief business officer of Tata Asset Management.
The benchmark Nifty 50 index fell in December for the third consecutive month. The index fell 2% last month and has declined more than 10% since its all-time high in September.
Experts believe that the expanding number of SIP accounts is another factor contributing to the increase in closures.
SIP data is frequently viewed as a crucial indication of retail investor behavior, as systematic investment plans are primarily used by individual investors.
While closures have increased, new SIP account openings have slowed after reaching a high of 7.3 million in July 2024. In December, there were 5.4 million new SIP registrations.
In 2024, active SIP accounts increased by 26.8 million to 103 million, up from 15.1 million in 2023. Account openings surged due to increased new investor involvement, good asset class performance, and record-breaking new fund offerings.
Last year, mutual funds established 70 active equity schemes, the majority of which concentrated on sectoral and thematic investing. On the passive front, 130 schemes were introduced.
SIP inflows have become critical support for the equity market, which has been under constant selling pressure from overseas investors in recent months. Equity mutual fund schemes drew a net Rs 3.9 trillion in 2024, bringing mutual fund equity purchases above Rs 4 trillion for the first time.
