India SIP inflows steady at ₹30,000 crore despite FPI outflows

Indian mutual funds are attracting ₹30,000 crore every month through systematic investment plans, even as foreign portfolio investors withdraw capital. Venkat Nageswar Chalasani, chief executive of the Association of Mutual Funds of India, noted that May brought a reversal in recent cancellation trends, with new SIP registrations once again outpacing closures.

This steady domestic inflow acts as a critical counterweight to global macroeconomic pressures. Chalasani cited geopolitical tensions, elevated inflation, high interest rates, uncertainty about AI-driven market trends, and a narrowing interest-rate differential between the US and India as primary headwinds. The persistence of retail flows suggests Indian investors are increasingly ignoring short-term foreign capital cycles.

The stability follows a brief period of stress. In March and April, SIP stoppage ratios exceeded 100% as closures outnumbered new accounts. Chalasani dismissed the idea that rising closures reflect fading retail interest, pointing instead to investors achieving financial goals or shifting from category-specific funds to flexi-cap strategies for broader market exposure.

This discipline is underpinned by a massive retail base. Approximately 95 million SIP accounts are active, contributing an average of ₹3,000 each. The mutual fund industry now serves roughly 63 million unique investors, with much of this growth occurring between 2019 and 2024. About 55% of Indian households recognize mutual funds as an investment vehicle, a metric built through sustained financial literacy campaigns.

Future growth is increasingly originating outside major metropolitan areas. Cities beyond the top 30 urban centres account for 55% of all SIP accounts and 40% of monthly contributions. However, these smaller cities represent less than one-fifth of total industry assets under management, indicating significant room for wealth consolidation as financial awareness deepens.

The expanding retail pool is also supporting new market entrants among the 56 registered asset management companies. While newer fund houses face pressure on expense ratios, a regulatory framework that permits higher charges for smaller funds helps absorb distribution costs. Shared KYC infrastructure and an established distributor network further reduce barriers to customer acquisition.