SIP stoppage ratio is a simple but powerful indicator of investor sentiment in the mutual fund industry. It is calculated by dividing the number of SIPs that are being discontinued by the number of new SIPs that are being started. If this ratio crosses 100, it means more SIPs are being closed than new ones being opened, indicating fear or caution in the market. If the ratio is around 50, it suggests that for every SIP being closed, two new SIPs are being initiated, which is a sign of strong investor confidence.
How Has This Ratio Changed in 2024?
In early 2024, the SIP stoppage ratio increased significantly, rising from 52 to 88 due to uncertainty surrounding the general elections in May. Many investors were hesitant to take risks in the market and chose to stop their SIPs. However, once the elections concluded and stability returned, the ratio normalized to around 50-60 between June and September.
But after October, the trend shifted again. As the market faced corrections, the ratio started climbing once more, moving from 61 to 79 and then jumping to 109. This indicates that more investors have been closing their SIPs due to falling stock prices, foreign institutional investor (FII) selling, and short-term losses in portfolios. The recent drop in market sentiment has pushed many to stop their regular investments out of fear.
Impact on Overall SIP Investments
Despite this rising stoppage ratio, the overall SIP corpus has only seen a small decline. The total SIP AUM, which was at ₹13.8 lakh crore, has now dropped to ₹13.2 lakh crore—around a 5% decline. This shows that while the number of SIP closures is increasing, the total investment amount is still holding up reasonably well. However, if this trend continues for another few months and the market remains weak, more investors could panic and stop their SIPs, which would reduce domestic institutional support for the market.
Why Stopping SIPs Could Be a Mistake
History has shown that stopping SIPs during market corrections often turns out to be a mistake in hindsight. Many investors close their SIPs out of fear and later regret missing out on the recovery. The key learning from previous cycles is that SIPs work best when investors stay disciplined through market ups and downs. Investors who continue their SIPs during weak markets often accumulate more units at lower prices, leading to better long-term returns.
The SIP Stoppage Ratio as a Market Indicator
This ratio is not just a number but a strong indicator of mass psychology in the market. A rise above 100 often signals peak fear among retail investors, which in many cases turns out to be a good time to invest rather than exit. When sentiment is at its worst, opportunities usually emerge for those who can remain patient and disciplined.
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