In March, the registration of systematic investment plans (SIPs) in mutual funds experienced a decline, with more SIPs being discontinued than newly registered. This trend has emerged in response to market disruptions caused by the ongoing crisis in West Asia, which has left retail investors feeling apprehensive.
Despite this downturn, inflows from SIPs reached an all-time high, indicating a degree of resilience among mutual fund investors even amid market volatility. This situation illustrates a divergence in investor behavior, where less committed investors opted to withdraw from their SIPs, while those with stronger convictions took advantage of the market correction linked to geopolitical tensions as a chance to increase their investments, according to fund managers.
Data from the Association of Mutual Funds in India indicates that approximately 5.282 million new SIPs were established in March, while around 5.338 million were discontinued, resulting in a SIP stoppage ratio of 101. Although the number of SIPs discontinued remained consistent with the trends observed over the previous three months, the number of new SIPs registered fell short of the three-month average of about 6.676 million, highlighting the anxiety among retail investors.
An analyst from a research firm noted, “The recent market sell-off has significantly diminished the value of investors’ holdings in various schemes, inciting panic and leading many retail investors to terminate their SIPs. It appears that most SIP contributions in March were likely made by high-net-worth individuals and family offices.”
Since the onset of the conflict, benchmark indices have dropped by 11% from their pre-war levels, driven by soaring crude oil prices and ongoing selling pressure from foreign investors.
Venkat Chalasani, the Chief Executive of the Association of Mutual Funds in India (AMFI), stated that the elevated stoppage ratio should not be a cause for alarm, as it might indicate that investors are reallocating their assets across different schemes or exiting after reaching their financial objectives. “Our primary focus concerning SIPs is on the number of active accounts and monthly inflows, as these metrics provide valuable insights into retail investor behavior,” he explained in an interview with The Indian Express.
Experts argue that an increase in discontinued SIPs does not necessarily signify a drop in retail investor sentiment. This data may encompass individuals who have transitioned to alternative investment products, those who have missed three consecutive payments, or simply reflect a cleanup of dormant accounts. Therefore, the number of active SIP accounts may serve as a more appropriate measure in such contexts.
In spite of the higher stoppage ratio, contributions through SIPs soared to a record ₹32,087 crore in March, marking a 7.5% increase month-on-month. Although SIP assets decreased by 9.2% to ₹15.11 lakh crore during the month due to poor equity market performance, they still accounted for 20.5% of the total assets under management (AUM) in the industry, up from 20.3% in February. Additionally, the number of active SIP accounts rose by 3% to 97.2 million in March, according to AMFI’s monthly report.
The increase in the stoppage ratio in March could be attributed to new investors hesitating to initiate SIPs during uncertain market conditions, while existing investors might have perceived the market correction as an opportunity for potential gains. George Thomas, an equity fund manager at Quantum Asset Management Company, remarked that seasoned investors might have increased their contributions during this volatile period, while new investors could find it challenging to start SIPs due to concerns over trailing returns.
While a stoppage ratio exceeding 100 on a single occasion is not particularly alarming, Thomas cautioned that if the market remains stagnant for an extended period, retail investors may become more cautious, resulting in lower returns. Since the bullish trend seen in August 2024, markets have generally been range-bound, with the Nifty 50 fluctuating between 22,000 and 26,000 points during this timeframe.
In March, equity mutual funds enjoyed significant participation, with net inflows rising by 56% month-on-month to ₹40,450 crore, reaching the highest level since July 2025. This surge was driven by segments such as flexi-cap, mid-cap, and small-cap funds. Equity funds continue to dominate the industry, comprising 43% of the total AUM.
