SIP accounts associated with the ‘Direct’ plan were to be closed in January but the situation reversed in February. In February, the pace of closure of SIP associated with the ‘regular’ plan increased. The SIP accounts associated with these plans (whose market is expected to be more flexible) decreased by 8 lakhs in February. This was at least the first major monthly decline in the last three years.
In February, the total number of SIP accounts active in the Mutual Fund (MF) schemes declined by about 10 lakhs to 10.17 crore. 80 percent of the total closed accounts were of SIP in regular schemes. In January, the net decline in SIP accounts came in the direct plan or the ‘Do-It-Yaself’ category. The data received by Business Standard shows that in January, the direct plan SIP accounts led to net closing of 9 lakhs while regular accounts increased by 4 lakhs.
Mutual fund schemes are in two variants – direct and regular plans. They only have a difference of expenditure. The direct plan is cheaper and can be purchased through online platforms. Regular schemes have high costs due to commissions and are mainly sold by banks, wealth platforms and individual distributors. The market fluctuations or declines are expected to have less impact on the accounts of regular schemes, as investors continue to get advice from their distributors. A senior fund officer says that the major decline in regular SIP accounts may be somewhat due to the asset management companies (AMCs) to repair SIP accounts.
The official said, “There was a lot of cleanliness in February due to which the SIPs were closed. It is being said that most AMCs are fixing their old SIP accounts. Other officials told the business Standard that they did not see any specific reason for the major fall in the accounts associated with the regular plan. The decline in the equity market and due to weakness in the returns of funds also affected the opening of new accounts. Due to this, the process of closure of accounts also intensified.
The return of one year SIP has been weak for the last two months except for some schemes in equity as the share prices declined a drastic fall during the period between September-February. There are about 1 crore special investors in the fund industry who have started investing in the last one year. These investors are about fifth of the total fund investors. The speed of opening SIP accounts in the first half of 2024 from the equity market and record number of equity fund offers had increased. The increase in opening SIP accounts has also increased the number of premature account closure.
First Published – March 30, 2025 | 10:24 pm IST