Equity Inflows Hit 11-Month Low While SIP Stoppage Ratio Surges to Record 127%

Equity Inflows Slump to 11-Month Low While SIP Stoppage Ratio Hits Record 127%

India's mutual fund industry presented a mixed picture in March 2025, with overall assets under management (AUM) growing robustly while equity inflows declined significantly amid increased market volatility. The monthly data released on April 11 reveals several interesting trends that warrant attention from investors and market participants.

Record AUM Growth Despite Equity Inflow Slowdown

The mutual fund industry's total assets under management increased by 23.11 percent year-on-year to reach Rs 65.67 lakh crore in March 2025. However, equity mutual funds recorded their lowest inflows in 11 months at Rs 25,082 crore, signaling growing investor caution amid volatile market conditions.

Industry experts attribute this decline to multiple factors including year-end redemptions and profit-booking tendencies. "We believe profit booking was a major contributor. April outflows would be a better indicator to watch for gauging investor sentiment," noted Akhil Chaturvedi, Executive Director & Chief Business Officer at Motilal Oswal AMC.

Market analysts also pointed to increased volatility triggered by US-China trade tariff concerns as a factor that prompted heightened investor caution. Additionally, fewer new fund offers (NFOs) during March contributed to the lower equity inflows.

Key Highlights from March's AMFI Report

1. SIP Contributions Hit Record High Despite Rising Stoppage Ratio

Systematic Investment Plans (SIPs) continued their impressive growth trajectory, with monthly inflows reaching an all-time high of Rs 25,926 crore in March—a substantial 34.53 percent increase year-on-year. This robust growth pushed total SIP assets to Rs 13.35 lakh crore, representing 20.3 percent of the industry's total AUM.

However, a concerning trend emerged with the SIP stoppage ratio hitting a record 127.5 percent in March, up from 122 percent in February. This means more investors discontinued their SIPs than initiated new ones—51 lakh accounts were closed compared to just 40 lakh new registrations. Total SIP accounts marginally decreased from 10.16 crore to 10.05 crore.

According to AMFI's CEO Venkat Chalasani, this high stoppage ratio primarily reflects the removal of inactive accounts as mandated by SEBI regulations rather than a fundamental shift in investor behavior.

2. Large-Cap Funds Experience Outflows While Mid and Small Caps Remain Popular

Large-cap funds witnessed significant outflows of Rs 2,479 crore in March, though their AUM still rose from Rs 3.25 lakh crore to Rs 3.59 lakh crore due to market appreciation. This contrasts sharply with the continued enthusiasm for small-cap and mid-cap funds, which attracted inflows of Rs 4,092 crore and Rs 3,439 crore respectively.

Experts suggest investors may be redirecting their large-cap allocations to flexi-cap and multi-cap categories, which provide exposure to large-caps while also offering diversification across market capitalizations.

"Continued incremental inflows were mainly seen in Flexicap, Smallcap and Multicap, which is a positive sign, indicating a long-term investment approach by investors despite global and macroeconomic concerns," observed Jatinder Pal Singh, CEO of ITI Mutual Fund.

3. Thematic and Sectoral Funds Losing Momentum

After enjoying strong growth throughout the year, thematic and sectoral funds showed signs of losing investor interest in March. While the category's AUM increased from Rs 4.27 lakh crore to Rs 4.55 lakh crore year-on-year, March inflows plummeted to just Rs 170 crore, down dramatically from Rs 5,712 crore in February 2025.

Industry observers attribute this sharp decline to heightened market volatility, underperformance of certain sectoral schemes, and disappointing GDP and corporate earnings data.

4. Gold ETFs Record Surprise Outflows

In an unexpected development, gold ETFs registered net outflows of Rs 77 crore in March, a stark reversal from the Rs 1,980 crore inflows recorded in February. Despite these outflows, the category's AUM rose to Rs 58,888 crore due to appreciation in gold prices.

Market analysts remain optimistic about gold's long-term prospects. "Gold is long seen as a hedge against inflation—and it will continue to be a favoured asset class. The dip we saw this month is largely a result of profit booking," explained Nehal Meshram, Senior Analyst at Morningstar Investment Research India.

As markets navigate through ongoing volatility and geopolitical uncertainties, April's data will be closely watched for signs of changing investor sentiment and possible recovery in equity inflows.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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India's Industrial Production Slumps to Six-Month Low of 2.9% in February 2025

India's Industrial Production Decelerates to Six-Month Low of 2.9% in February

India's industrial output growth slowed significantly in February 2025, falling to a six-month low of 2.9 percent from 5.2 percent in January, according to official data released on April 11. This deceleration mirrors the weakening performance of the core infrastructure sector, which constitutes 40 percent of the Index of Industrial Production (IIP).

Broad-Based Slowdown Across Sectors

The slowdown was widespread, affecting most major industrial categories and sectors. According to experts, the leap year base effect contributed significantly to the year-on-year decline in growth metrics.

"As expected, the leap year base pulled down the YoY growth of the IIP to 2.9 percent in February 2025 from 5.2 percent in January 2025," noted Aditi Nayar, Chief Economist at ICRA. She added that the deceleration was broad-based, with all use-based categories and two of the three main sectors (except electricity) experiencing slower growth rates compared to the previous month.

Data published in March had already indicated that growth in the core infrastructure industries had declined to a five-month low of 2.9 percent in February, down from 5.1 percent in January.

Sectoral Performance Analysis

Breaking down the three major industrial sectors:

• Electricity was the only sector to show improvement, growing at 3.6 percent compared to 2.4 percent in January
• Manufacturing, the largest component of India's industrial index, slowed significantly to 2.9 percent from 5.8 percent
• Mining growth fell to a four-month low of 1.6 percent, down sharply from 4.4 percent in the previous month

Use-Based Industry Trends

The use-based classification of industries revealed concerning trends across all six sectors:

• Consumer non-durables continued their contractionary trend, declining by 1.8 percent compared to a 0.3 percent contraction in January
• Consumer durables growth slowed significantly to 3.9 percent from 7.2 percent
• Capital goods, despite the slowdown, maintained relatively robust growth at 9 percent, only slightly below the 10.3 percent recorded in January
• Infrastructure/construction goods saw growth decline to 6.4 percent from 7.4 percent
• Primary goods growth was cut in half, falling to 2.8 percent from 5.5 percent in the previous month

Fiscal Year Performance and Outlook

For the eleven-month period of April 2024 to February 2025, industrial growth stood at 4.1 percent, notably lower than the 6 percent registered during the same period in the previous fiscal year.

The manufacturing sector, which constitutes the largest component of India's industrial index, is projected to grow at 4.3 percent in FY25, significantly lower than the robust 12.3 percent growth recorded in the previous fiscal year.

The performance also reflects the sluggish pace of government capital expenditure, which had reached only 80 percent of the full-year target in the eleven months of the fiscal year.

March Expectations

Looking ahead to March data, economists do not anticipate significant improvement. "While the growth performance of mining is expected to deteriorate in March 2025 relative to February 2025, this is likely to be offset by an uptick in electricity generation, amid steady manufacturing growth," Nayar forecasted. ICRA expects IIP growth to remain at approximately 3.0 percent in March 2025, similar to February levels.

The consistent deceleration in industrial production, particularly in consumer goods categories, may raise concerns about domestic demand conditions and could influence monetary policy considerations in the coming quarters.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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