A very insightful data set from the Association of Mutual Funds of India (AMFI) was recently shared by Mr. Padmanabhan on X. It highlights a crucial aspect of retail investing—the SIP stoppage ratio. This ratio is an important metric that helps gauge investor sentiment, especially in volatile markets.
Understanding the SIP Stoppage Ratio
The SIP stoppage ratio is the number of discontinued SIPs compared to the number of newly registered SIPs. If this ratio crosses 100%, it indicates that more SIPs are being stopped than started, signaling investor discomfort. When investors lose confidence in the market, they tend to pause or stop their SIPs rather than continue through corrections.
Recent SIP Trends from April 2024 to January 2025
In April 2024, 63 lakh new SIPs were registered while 33 lakh were discontinued, leading to a stoppage ratio of around 52%. However, by May, the ratio surged to 88%, then briefly fell to 60% before rising again. From November onwards, as market corrections intensified, the ratio kept climbing—79%, 82%, and eventually 109% by January 2025. This means that in January, 56 lakh new SIPs were created, but 61 lakh were stopped, leading to a net decline.
SIP Contribution Remains Stable Despite Rising Stoppages
Interestingly, even as the number of SIPs being discontinued is rising, the total SIP contribution has not shown a major decline. The monthly SIP inflow remains around ₹26,000-26,400 crores, indicating that while some investors are stopping SIPs, those continuing may be contributing higher amounts. This suggests that while sentiment is turning cautious, a significant portion of investors are still committed to their long-term investments.
What This Means for Market Stability
The increasing stoppage ratio is an early sign of retail exhaustion. If this trend continues, it could weaken the domestic support that has been countering FII outflows. The key to watch in the coming months will be whether the actual SIP contribution starts declining along with the number of SIP accounts. If that happens, it could indicate deeper market stress and reduced retail participation.
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