SIP Stoppage Ratio Hits All-Time High of 128% in March
The Systematic Investment Plan (SIP) stoppage ratio has hit an all-time high of 128% in March, according to data released by the Association of Mutual Funds in India (AMFI). This is a worrying trend, especially in the backdrop of global economic turmoil and weakening investor sentiment. The SIP stoppage ratio, which measures the percentage of SIPs that were discontinued or whose tenure ended in a given month, has been on an upward trajectory for several months now. In February, it had hit a record high of 122%.
The data for March shows that over 51 lakh SIPs were discontinued or their tenure ended, while the number of new SIPs started stood at roughly 40 lakh. This means that the SIP stoppage ratio has jumped to 128%, indicating that the number of SIPs discontinued is more than the number of new SIPs started. This is a stark contrast to the trend seen in previous years, where the number of new SIPs started was consistently higher than the number of SIPs discontinued.
So, what could be the reasons behind this sudden spike in SIP stoppage ratio? Experts attribute this to the current market volatility and uncertainty surrounding the global economy. The COVID-19 pandemic has led to widespread economic disruption, and investors are becoming increasingly risk-averse. This is reflected in the market, where stock prices have been witnessing wild swings, making it difficult for investors to make informed decisions.
Another factor contributing to the high SIP stoppage ratio is the fear of missing out (FOMO) that investors experienced during the bull run of 2020. Many investors had started SIPs at the height of the market, expecting the rally to continue indefinitely. However, when the market started to correct, these investors found themselves stuck with losing positions, leading them to discontinue their SIPs or sell their existing holdings.
Experts also point out that the high SIP stoppage ratio could be a result of investors shifting their focus from equities to other asset classes, such as fixed income securities or gold. As the market becomes increasingly volatile, investors are becoming more cautious and are opting for safer investment options.
So, is it the right approach for investors to discontinue their SIPs in the face of market volatility? Experts are divided on this issue. Some argue that investors should continue with their SIPs, as they provide a disciplined approach to investing and can help investors ride out market fluctuations. Others argue that investors should pause their SIPs and reassess their investment strategy in the current market conditions.
One expert, who wished to remain anonymous, pointed out that “In the current market scenario, it’s essential for investors to reassess their investment goals and risk tolerance. If an investor’s risk tolerance has changed, it may be prudent to adjust their investment portfolio or discontinue their SIPs until the market stabilizes.”
Another expert, Rajan Bharti, CEO of InvestIndia, emphasized the importance of staying invested and riding out market fluctuations. “SIPs are a great way to invest in the market, as they provide a disciplined approach to investing and can help investors avoid emotional decisions. Instead of discontinuing SIPs, investors should focus on rebalancing their portfolios and adjusting their investment strategy to suit their changing risk tolerance.”
In conclusion, the SIP stoppage ratio hitting an all-time high of 128% in March is a worrying trend for the mutual fund industry. While market volatility and uncertainty are certainly contributing factors, experts are divided on the best approach for investors. Whether investors should continue with their SIPs or discontinue them and reassess their investment strategy, one thing is certain: the current market conditions are presenting a unique set of challenges for investors, and it’s essential to approach these challenges with caution and a clear understanding of one’s investment goals and risk tolerance.
