Mumbai: The stock market's recent instability has led to a noticeable decline in Systematic Investment Plans (SIPs), which are widely regarded as a robust defense against market fluctuations. In the quarter ending March 31, 2025, registrations for new SIPs, a popular investment avenue for retail investors, experienced a downturn, accompanied by an uptick in the number of investors discontinuing their SIPs. This trend suggests that a significant number of investors are choosing to cease their SIP contributions, likely due to their reluctance to renew these plans amid challenging market conditions.

According to data from Valuemetrics Technologies, a mutual fund analytics platform, the mutual fund industry has seen a sharp decline in SIP activity. Between July and September of the previous year, the sector averaged 2.96 million net new SIP registrations each month. However, in stark contrast, the average for 2025 has dropped to approximately 890,000 new SIP accounts per month. As of the end of March, the total number of SIP accounts reached 100.5 million, but the diminishing interest raises questions about the future of this investment strategy.

Manuj Jain, co-founder of Valuemetrics, noted the correlation between the decline in SIP registrations and the performance of equity markets. In March 2025, the industry recorded 4.02 million new SIP registrations, reflecting a 10% decrease from February figures. In comparison, during the peak of the recent bull market from July to September, the average monthly SIP registrations soared to 6.77 million, with July alone witnessing an impressive 7.26 million new SIP accountsthe highest recorded in the fiscal year 2025.

Furthermore, the trend in SIP discontinuations has also raised alarm bells. From an average of 3.81 million monthly discontinuations in the September quarter, this number surged by 47% to 5.59 million per month for the January to March period. Some of these discontinuations are linked to reconciliations involving account closures from the previous financial year, as clarified by officials from the Association of Mutual Funds in India during a recent conference call. The net new SIP additions as a percentage of total outstanding accounts saw a significant decline, plummeting from 3.9% in July to -1.1% by March, indicating a troubling shift in sentiment among investors.

Harshvardhan Roongta, a certified financial planner at Roongta Securities, commented on the situation, stating, Investors who impulsively started SIPs in narrowly focused themes such as defense, tourism, and small-cap funds are now reassessing their choices and opting out of these investments. Since the market sell-off initiated on September 27, the Nifty index has experienced a drop of 9.6%. Meanwhile, mid-cap and small-cap indices, such as the Nifty Mid-Cap 150 and Small-Cap 250, have seen declines of 14% and 17%, respectively. Although SIP flows remained relatively steady throughout most of the October to December period, the persistent market weakness has fueled growing doubts among investors regarding the future prospects of equity investments.