Market veteran Gurmeet Chadha has highlighted the critical role of retail investors and Domestic Institutional Investors (DIIs) in maintaining India's market stability, following the release of December 2024 mutual fund data that showed record-breaking Systematic Investment Plan (SIP) inflows. His comments came as fresh data revealed SIP contributions reaching unprecedented levels despite challenging market conditions.

Record SIP Performance in December 2024

The December 2024 mutual fund data revealed strong momentum in systematic investment plans, with contributions hitting a fresh record high. The performance metrics demonstrate sustained investor confidence in the domestic market.

Market Veteran's Assessment

Gurmeet Chadha emphasized the significance of domestic investor participation in a social media post, stating that the Nifty would have plunged to 20,000 levels without the support of retail investors and DIIs. He described the SIP growth as "heartening" given the tough market environment and called for rewarding patient, long-term risk capital.

Chadha's analysis highlighted the contrast between domestic and foreign investment flows, noting that Foreign Institutional Investors (FIIs) have sold ₹6.00 lakh crore worth of investments over the past two years. This massive outflow underscores the importance of domestic capital in maintaining market stability and preventing more severe corrections.

Domestic Investment Impact

The sustained growth in SIP contributions reflects several key market dynamics:

• Consistent domestic participation despite volatile market conditions
• Long-term investment approach by retail investors through systematic plans
• Counterbalancing effect against significant FII selling pressure
• Financial stability support for the broader Indian market ecosystem

The 17.00% year-on-year growth in SIP inflows demonstrates resilient investor behavior, with retail participants continuing their systematic investment approach even during challenging periods. This consistency has provided crucial support to market valuations and helped absorb selling pressure from foreign investors.

Call for Policy Support

Chadha advocated for measures to reward patient, long-term risk capital, recognizing the stabilizing influence of domestic investors on India's financial markets. His comments suggest the need for policy frameworks that acknowledge and incentivize the contribution of retail investors and DIIs to market stability.

The record SIP inflows of ₹31,002.00 crore in December 2024 represent not just numerical growth but a testament to the maturity and commitment of India's domestic investment community in supporting long-term market development.

Source: https://economictimes.indiatimes.com/markets/stocks/news/nifty-would-have-plunged-to-20k-without-retail-diis-gurmeet-chadha-calls-for-rewarding-patient-risk-capital/articleshow/126437505.cms

Systematic Investment Plan (SIP) inflows reached unprecedented levels in December, with monthly contributions surging to a record ₹31,002 crore, demonstrating the growing appeal of disciplined investing among retail participants. This represents a substantial increase from the ₹29,445 crore recorded in November, highlighting the sustained momentum in systematic investing.

SIP Account Growth and Participation

The number of contributing SIP accounts expanded to 9.79 crore in December, compared to 9.43 crore in November, reflecting steady growth in retail participation across the mutual fund industry. This growth underscores the increasing adoption of systematic investing as a preferred investment strategy among Indian investors.

New Registrations and Discontinuations

During December, the industry witnessed robust demand with 60.46 lakh new SIPs being registered, higher than the 57.13 lakh SIPs registered in November. However, the month also saw 51.57 lakh SIPs being discontinued or reaching maturity, compared to approximately 43 lakh SIPs in the previous month.

This dynamic pushed the headline SIP stoppage ratio to approximately 85% in December, significantly higher than the 75.56% stoppage ratio recorded in November. The stoppage ratio indicates how many SIPs stopped or matured compared to newly registered SIPs in a given month.

Understanding the True Discontinuation Rate

AMFI provided crucial clarity on the composition of SIP closures in December. Of the total SIP closures, around 33 lakh were genuine discontinuations, while nearly 18.6 lakh SIPs reached their natural maturity. When considering only discontinued SIPs, the adjusted stoppage ratio moderates to approximately 55%, offering a more accurate reflection of actual investor churn.

Assets Under Management and Industry Performance

SIP assets under management reached ₹16.63 lakh crore, representing 20.7% of the mutual fund industry's total assets. This substantial allocation demonstrates the significant role systematic investing plays in the overall mutual fund ecosystem.

On the equity side, mutual fund inflows moderated marginally to ₹28,054 crore in December, declining approximately 6% from ₹29,911 crore in November, amid market volatility and global headwinds. The overall industry assets under management stood at ₹80.23 lakh crore in December, slightly lower than ₹80.7 lakh crore in November.

The record SIP inflows in December underscore the resilience of systematic investing even during periods of market uncertainty, with retail investors continuing to demonstrate confidence in long-term wealth creation through disciplined investment approaches.