The surge in SIP cancellations had more to do with the rules laid out in a SEBI circular rather than fears among investors regarding market volatility.
| Photo Credit: HEMANSHI KAMANI
The number of SIP cancellations more than tripled to 162.3 lakh in April compared with the previous month, creating a perception that market volatility had spooked investors in mutual funds. However, The Hindu has learnt that this surge in cancellations had more to do with the rules laid out in a SEBI circular rather than fears among investors.
In a circular, reviewed by The Hindu, dated January 3, 2024, the Securities and Exchange Board of India (SEBI), India’s capital markets regulator, had said SIPs with more than three consecutive failed instalment- payment attempts were to be accounted as invalid. This applied to daily, weekly, monthly and fortnightly contributions. SIPs with quarterly and bimonthly contributions will be invalid after missing payment for two consecutive time periods, the circular read. AMCs must process the cancellation within 10 days from the day the investor makes the request, SEBI added in the circular. SEBI had given the AMCs and AMFI time till April 1, 2024 to provide more transparent data on cancelled SIPs. Before the circular, data on the number of SIP accounts included inactive accounts too. The circular was to improve data dissemination.
“The entire cleaning up process took longer than expected. While in respect of all the future transactions, they implemented it, but legacy accounts could not be cleaned up. And that cleaning up process, we have initiated in the month of December, January (2025),” said Venkat Chalasani, chief executive officer of AMFI. The backlog of all invalid accounts were starting to be cleaned up in January 2025. The number of discontinued accounts grew 56% in January, 21% in February and declined 15% in March 2025 and then tripled in April.
AMFI has also started showing the number of contributing SIPs, which range between 70-80% of the total outstanding accounts from April 2024. “This month we have totally completed the clean-up process,” Mr. Chalasani said. With the new data added, it counts only the number of contributing SIPs and the number of outstanding SIPs. The monthly dip can hence be calculated by finding the share of non-contributing accounts in the total outstanding SIP accounts.
The comments of AMFI assumes significance as the increase in the number of discontinued SIPs coincided with correction and market volatility, creating fears of mutual fund investors being spooked by the markets.
Published – May 14, 2025 07:40 pm IST
