Mutual Fund SIPs on the Decline in 2025: What’s Driving Investors Away? 

Systematic Investment Plans (SIPs) have been one of the most preferred investment strategies in India for years. The concept of investing a fixed amount at regular intervals has made it easier for retail investors to participate in the stock market without worrying about market timing.

Over time, SIPs have gained immense popularity because they:

• Encourage financial discipline and long-term investing.
• Offer rupee cost averaging, where you buy more units when prices are low and fewer when prices are high.
• Help investors avoid emotional decision-making, as they invest consistently regardless of market fluctuations.
• Leverage the power of compounding, enabling wealth accumulation over extended periods.

With all these advantages, SIPs have continued to see record-breaking contributions and new registrations in recent years. However, for the first time in a long while, there was a notable decline in outstanding SIP accounts in January 2025, signaling a shift in investor sentiment.

Why are investors stopping or pausing their SIPs? What does this trend indicate for the mutual fund industry? Should you be worried about your SIP investments? Let’s explore.

Decline in SIP Accounts Based on AMFI Data 

According to data released by the Association of Mutual Funds in India (AMFI), the number of outstanding SIP accounts declined by almost 5 Lakh in January 2025. This is a significant shift, as SIPs have generally been on a growth trajectory for years.

Key AMFI Data Highlights 

• Total Outstanding SIP Accounts fell from 1,032.03 Lakh in December 2024 to 1,026.89 Lakh in January 2025.
• New SIP Registrations rose slightly to 56.19 Lakh in January 2025, compared to 54.27 Lakh in December 2024.
• SIPs Discontinued or Tenure Completed saw a major increase to 61.33 Lakh in January 2025, up from 44.90 Lakh in December 2024.
• Total SIP Contribution remained strong at ₹ 26,400 Crore in January, 2025, indicating that despite a drop in accounts, investors are still contributing actively.

This net decline in SIP accounts indicates that while new investors continue to enter, the rate of discontinuation has outpaced fresh registrations.

Key Insights from AMFI Report: What the Data Reveals About Investor Sentiment 

Looking at the numbers alone can never tell the full story. The decline in SIP accounts doesn’t necessarily imply a lack of confidence in the Indian market. While it may hint at changing investor behavior and concerns, it is important to take a look at some of the prominent underlying causes.

• Increased Discontinuation Rate: A higher number of investors stopped or completed their SIPs. This may either be due to a sense of nervousness or anxiety caused by the large-scale selling by Foreign Institutional Investors (FII/FPI) or a shift in financial priorities. As per reports, FIIs net sold Indian shares worth ₹ 87,374.66 Crore in January, 2025, as compared to only ₹16,982.48 in the previous month. This massive difference between two consecutive months may have deterred some investors and made them halt or pause their SIPs for the interim period.
• Market Volatility Concerns: Many investors may have also paused or exited their SIPs due to uncertainty in the stock market, fearing short-term losses. With the consistent downward moving domestic indices, some people tend to sell in panic while others prefer sitting on the fence until the situation stabilises. Many others, though, consider such periods of slowdown as an opportunity for long-term investments in companies with sound financials, at a discounted price. 
• Strong SIP Contributions Continue: Despite account closures, total SIP inflows remain robust, indicating that many investors are still committed to systematic investing. In fact, in January this year, while the FIIs were busy selling, domestic investors (DII) had a net purchase of ₹ 86,591.80 Crore, up from ₹ 34,194.73 Crore in the preceding month. 

However, the AMFI data shows that while the mutual fund industry remains resilient, the decline suggests that retail investors are becoming more cautious.

Reasons for Decline in SIP Accounts 

Several factors have contributed to the recent drop in SIP accounts:

1. Market Volatility and Fear-Driven Exits 

Stock markets have witnessed fluctuations and corrections in recent months. Some investors, especially first-time or risk-averse investors, may have panicked and stopped their SIPs to avoid short-term losses.

2. Economic Uncertainty and Rising Expenses 

With inflation and interest rate hikes, household budgets have been impacted. Many investors might have paused their SIPs due to liquidity concerns, prioritising immediate financial needs over long-term investments.

3. Misconception That SIPs Should Be Stopped in Falling Markets 

Some investors mistakenly believe that when markets decline, stopping SIPs will protect their portfolio from losses. In reality, SIPs work best during volatile markets, as investors accumulate more units at lower prices.

4. Underperformance of Certain Mutual Funds 

If a particular mutual fund underperforms, investors may exit the SIP instead of switching to a better-performing fund. This often happens when investors lack proper financial guidance.

5. Short-Term Mindset Among New Investors 

Many investors who joined SIPs during a bull market expected quick gains. When markets slowed down, some of these investors exited due to disappointment, without understanding the long-term nature of SIPs.

Impact on the Mutual Fund Market 

The decline in SIP accounts does not indicate a crisis, but it does have certain implications:

• Reduced AUM Growth: A decline in SIP accounts may slow the growth of mutual fund assets under management (AUM). This is already visible from the AMFI figures of ₹ 13,19,853 Crore as SIP AUM in January 2025, versus ₹13,63,137 Crore in December, 2024. 
• Revenue Impact for AMCs: Fund houses earn fees based on AUM, so a slowdown in SIP growth can affect their profitability.
• Investor Sentiment & Market Confidence: If the trend continues, it may signal a broader decline in retail investor confidence, influencing mutual fund industry trends.

However, the good news is that SIP contributions remain strong, suggesting that the majority of committed investors are continuing their investments.

Why It Makes Sense to Continue SIPs 

Despite short-term concerns, investors should not stop their SIPs based on market movements. Here’s why:

1. Rupee Cost Averaging Works Best in Volatility 

When markets are down, SIPs buy more units at lower prices, reducing the average cost per unit over time. This could lead to higher returns when markets recover.

2. Market Corrections Are Temporary 

Historically, markets have always recovered from downturns. Investors who remain patient and continue SIPs could benefit from a recovery in market sentiments.

3. Power of Compounding Needs Time 

The longer you stay invested, the higher your returns due to compounding. Stopping SIPs interrupts this growth process.

4. SIPs Eliminate Emotional Decision-Making 

SIPs remove the need to time the market, ensuring consistent investment behavior regardless of market conditions.

Conclusion 

While the decline in SIP accounts in 2025 raises concerns, it is largely driven by market sentiment, liquidity needs, and short-term uncertainty. However, stopping SIPs due to fear can result in lost opportunities for long-term growth.

SIPs remain a powerful investment strategy for building wealth steadily over time, especially in volatile markets. Instead of discontinuing, you should review your fund choices, stay committed, and consult financial advisors if needed.

By staying invested and continuing SIPs, you ensure that your financial goals remain on track, regardless of short-term market fluctuations.