SIP inflow shrinks for the second month as investors aim for IPO gains

A bull rally may not necessarily benefit all the sections of the market. Investment through the systematic investment plan (SIP) route continued to fall for the second consecutive month in February 2021 notwithstanding the sustained market rally. According to the Association of Mutual Funds in India (AMFI) data, the SIP inflow fell to Rs 7,528 crore in February from Rs 8,418 crore in December 2020. It fell by 11.5% compared with the year-ago level of Rs 8,513 crore.

Experts cite several reasons for the weakness in the SIP book at a time when the broader market is near a record high. The major ones are rising direct investment in initial public offerings (IPOs) given the high listing gains compared with unsatisfactory returns by certain types of mutual funds and need to cover expenses amid salary cuts and job losses.

“After exiting from mutual funds, some investors are directly aiming for equities. This explains the upbeat retail participation in recent IPOs. There is also a section of investors which is discontinuing SIPs to meet personal expenses.” Rupesh Bhansali, head-mutual funds, GEPL Capital said.


The AMFI data showed that the number of discontinued or matured SIPs rose to 7.9 lakh in February from 5.7 lakh in the comparable year-ago month.

Yogesh Parkar, operational manager at a mid-sized fintech company and a mutual fund investor, has redeemed about 80% of his SIP investments since October 2020. “I was dissatisfied with the performance of some large-cap schemes which generated less than 10% returns last year even after investing for two years,” he said

Also, Parkar’s salary was deducted by 30% due to the poor business conditions during the lockdown last year. “Discontinuing SIPs helped me cover my expenses,” he added.

Vishal Dhawan, CFP, Plan Ahead Wealth Advisors said, “One has to take into account the income impact of the Coronavirus. Retail investors working in sectors such as retail, entertainment, hospitality and others have been severely impacted,” he said.