Why have SIP closures in Indian mutual funds gone up sharply in the month of March. What does that indicate about retail interest?

While the one month rise in SIP closure ratio does not say much, this is an issue that must be addressed urgently. For March 2020, SIP closure ratio stood at 70%. For every 10 new SIPs opened, 7 of existing SIPs are closed. SIPs are increasing at a much slower rate. While it shows a fall in retail interest it is more due to the liquidity crunch caused by the lockdown and the 30% fall in the stock market indices. SIPs are part of the long term portfolios of individual investors and are a measure of the level of conviction investors have on equity as an asset class.

Between 2014 and 2019, the MF AUM growth from Rs.8 trillion to Rs.27 trillion was driven by SIPs. SIPs collect nearly Rs.8500 crore of flows into equity funds each month and are linked to long term goals. However, this could be a one-off event and may not necessarily be an outcome of any large scale panic.