Market sell-off, year-end fund crunch force more MF investors to discontinue SIPs

Of the 5 crore SIPs that were cancelled in FY2025, nearly one-third were discontinued in the last three months (January-March) of the previous fiscal, amid volatility in the domestic stock markets, investors’ inability to pay their SIP instalments due to cash crunch on account of job losses, or deduction related to income tax.

In the January-March 2025 quarter, 1.67 crore SIPs were closed, with the highest number of discontinuations in January at 61.33 lakh. While 54.7 lakh SIPs were stopped in February, the number for March stood at 51.55. SIPs are considered as a safe and stable investment route by investors who are worried about volatility.

“The recent market volatility could be one of the reasons for slower momentum in addition to new SIPs and higher cancellation in existing SIPs. SIP cancellation ratio surged to 128.3 per cent (in March), meaning more cancellations than registered,” said Sriram BKR, Senior Investment Strategist, Geojit Investments Ltd

The SIP cancelled to new registration ratio has been elevated since September 2024, he said.

The domestic stock market saw corrections in January and February. The NSE’s Nifty fell 0.6 per cent in January and around 6 per cent in February. Although Nifty rose 6.3 per cent in March, investors were on the edge due to uncertainty around US President Donald Trump’s anticipated tariff announcement on April 2.

In the last quarter of FY2025, the number of new SIPs registered also showed a declining trend – from 56.19 lakh in January to 44.56 lakh in February, and further falling to 40.19 lakh in March.

“India is still an underpenetrated country in terms of equity investments. There are many first-time investors, and whenever there is a correction in markets, which we witnessed recently, it makes such investors jittery, prompting them to stop their SIPs,” Rushabh Desai, Founder, Rupee with Rushabh, an investment services and mutual fund distribution firm.

Besides, some investors may have reached their goals and hence stopped their SIPs.

The rise in SIP cancellation in the last three months can also be attributed to reconciliation which happened between the exchanges and Registrar and Transfer Agents (RTAs) pertaining to 2024. In 2024, SEBI had directed mutual fund houses to close SIP accounts that had been discontinued for three months. The norm came into effect on April 1, 2024. In January, 25 lakh SIP accounts were closed due to reconciliation between exchanges and RTAs.

“In the last few months, we have seen a noticeable trend of SIPs getting cancelled. Some of it is related to job losses or change in job. Whenever investors see uncertainty, they tend to pause or cancel their SIPs to ensure they have cash in hand,” said a Mumbai-based investment advisor. Income tax deductions in the January-March quarter also put a strain on salaried investors’ finances. In such cases, some investors stop their SIPs to maintain liquidity.

Inflows through SIPs have also slowed down in the last three month. In March, SIP contribution stood at Rs 25,926 crore, which was the third consecutive month of declining SIP inflows. SIP contribution stood at Rs 26,400 crore in January and Rs 25,999 crore in February.

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