The first half of 2025 has brought a setback for the mutual fund industry. Figures indicate that a total of 11.2 million SIPs (Systematic Investment Plans) were closed between January and June. SIPs, generally considered the most stable and disciplined way of investing, witnessed a decline as market fluctuations and changes in tax rules took hold at the start of the year.
Decline in SIPs from January to April
In the first four months of this year, more SIPs were closed than new ones started each month.
- In January, 500,000 more SIPs were closed.
- In February, this number increased to 1 million.
- In March, 1.1 million SIPs were closed.
- In April, a record 11.6 million SIPs were closed.
This trend left both mutual fund companies and investors surprised. Notably, there wasn't a significant drop in the stock markets during this period, yet investors started withdrawing their money.
Market Volatility Increased Concerns
Experts believe that uncertainty prevailed on several economic and political fronts worldwide from the beginning of the year. Events like changes in US President Trump's tax rules and a slowdown in the global economy instilled fear in investors' minds. According to Shruti Jain of Arihant Capital Markets, many investors were scared by this uncertain environment and decided to close their existing SIPs.
What is the SIP Stoppage Ratio and Why is it being Discussed?
The SIP Stoppage Ratio is a metric that indicates how many new SIPs were initiated in a month versus how many existing ones were closed.
- In June 2025, this ratio was 78 percent.
- In May, it was 72 percent.
- In June of the previous year, it was 59 percent.
This clearly shows that the rate of closing existing SIPs has increased rapidly. However, experts believe that a large number of these SIPs have also reached their maturity period or investors are choosing new SIPs in their place.
Reasons Behind Changing Investment Behavior
Investors who expected good returns from mutual funds in 2024 did not receive the expected profits. Also, the prices of some major stocks in the stock market went up significantly, creating the perception among new investors that there would no longer be much profit. In addition, changes in tax rules increased the tax burden on some SIPs, reducing investors' interest.
AMFI Data Reveals the Story
According to AMFI (Association of Mutual Funds in India), there were only two months this year when the number of new SIPs exceeded the number of closed SIPs. The trend of closing SIPs continued for the remaining four months. April was the worst, where three times more SIPs were closed.
According to a report by Nomura, the high valuation of the stock market and policy uncertainty were major reasons behind this investor reaction.
Investors are Watching Market Trends
This changing attitude of investors clearly indicates that people are now taking steps with a little more caution. There was a huge trend in mutual funds in 2023 and 2024, but this enthusiasm slowed down somewhat in 2025. Experts believe that people are now carefully observing the market trends and investing or withdrawing accordingly.
Is This a Sign of a Major Change?
These figures are certainly an alarm bell for the mutual fund industry. However, experts are not viewing it entirely negatively. They say that portfolio rebalancing by investors could also be a reason for SIP closures. This means that money has been withdrawn from one fund and invested in another.
Change in Investor Mindset
The 2025 figures also show that investors are now making decisions with more information and research. They are reacting quickly to trends and retreating from small losses due to fear.
However, despite such changes, investment in SIPs has not completely stopped. AMFI data also shows that millions of investors still have active SIPs and are adding new money every month.
What Has Been the History of SIPs?
SIPs have been a preferred investment method in India for the past two decades. It has provided investors with discipline, cost averaging, and good returns over the long term. From 2018 to 2022, a lot of money came into equity mutual funds through SIPs. But this change in 2025 has forced both investors and companies to rethink.
