The Mutual funds sahi hai campaign promoted by the Association of Mutual Funds of India — across television, print, outdoor and digital — has hit a crescendo with the industry body signing up cricketers right from Sachin Tendulkar, M.S. Dhoni, Rohit Sharma and others. The campaign has kept the momentum going in SIPs — at ₹1.99 lakh crore, gross SIP flows hit an all-time high in FY24, over 27% higher from FY23.

However, in 2024, May was a month to remember. The ratio of SIPs discontinued vs those registered hit a high of 88.4%, a peak that seemed to signal a seismic shift in investor behaviour. This turned out to be a one-off event, though, as the number of SIPs discontinued fell in June. Despite this, the landscape remains fraught with tension: The six-month average SIP cancellation rate stubbornly clings to a high of 57%. Even excluding May’s anomaly, the rate is still 50%.

While the number of active SIP accounts hit an all-time high of 8.99 crore in June, there seems to be an underlying tale of wavering confidence. In 2023, the 12-month average SIP cancellation rate around 57%, up from 53% in 2022, 41.9% in 2021, and a Covid-induced high of 66% in 2020. With an estimated 85% of SIP flows directed towards equity, this suggests that of the 8.99 crore active SIPs, around 7.64 crore are equity-related.

The pandemic was a crucible that tested investor resolve. In March 2020, as global stock indices plummeted on what became known as Black Monday, SIP cancellation rate spiked to 70.9% from 50.4% in February. The Dow Jones experienced its most severe drop since the 2008 recession, and the Sensex nosedived, triggering circuit breakers and recording its biggest one-day fall. Although markets eventually recovered, the shock left retail investors jittery, with the cancellation rate soaring to 80.7% in May 2020 and remaining elevated through the year.

As the pandemic eased and markets rose, the cancellation rate fell to 47.8% for 2021 and 2022. However, it spiked again to 57% in 2023 and has stayed high in 2024. The reasons are manifold: Job losses, salary cuts, and the speculative nature of timing the market. The 88% cancellation rate in May 2024 likely reflects a mix of maturing three-year SIPs and investor wariness amid volatile macroeconomic and geopolitical conditions.

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