5 SIP trends in the past 5 years identified by IDFC Mutual Fund

A presentation by IDFC Mutual Fund to its distributors has outlined five key trends in Systematic Investment Plans (SIPs) over the past 5 years – FY2016-17 to FY 2020-21.

SIPs steadily rising: The number of SIPs has grown to 3.73 crore in March 2021 from 1.35 crore in March 2017. In terms of money flowing in through SIPs, this rose from Rs4,335 crore in March 2017 to Rs9,182 crore in March 2021.

Faster growth in direct plans: SIPs in direct plans have grown faster than SIPs in regular plans. Of the industry-wide SIP book of Rs9,182 crore in March 2021 around 1,685 crore was in direct plans or 18% of the total. This share was just 9.4% in March 2017.

Share of debt SIPs grows: Equity used to account for the lion’s share of SIPs. However its proportion has dropped from 90-86%. In other words, SIPs in debt mutual funds have gained some share.

RIAs fintechs lead the pack: In FY21, fintechs Registered Investment Advisors (RIAs) accounted for the largest share of SIP registrations. These intermediaries registered 36.19 lakh SIPs followed by mutual fund distributors at 20.86 lakh. Fintechs RIAs also have the best rate of SIP retention (the ratio of SIPs ceased to fresh SIPs registered). This was 27% for fintechs/RIAs compared to 99% for mutual fund distributors.

Smaller cities catch up: Smaller cities towns have shown faster growth in SIP registrations. New SIPs in these areas (classified as beyond the top 30 cities or B 30) grew by 24% whereas in T 30 they grew by 17%. 59.61 lakh out of the no of SIPs (1.41 crore) came from B 30 locations. The regional split of SIPs however has remained roughly the same over the past 5 years with western India accounting for 35% of SIPs.

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