The recent correction in the market has had some telling impact on the mutual fund industry. Not only have flows slowed down to 3-month lows but the small cap funds saw significant decline and the SIP registrations have come down drastically. This is as per the latest data shared by the Mutual Fund Association, AMFI. This data is particularly relevant for equity market investment as well as the Mutual Fund flows are closely linked with the equity market movement. Many industry observers have linked the recent correction in small and midcaps to redemption pressure in midcap and small cap funds.
According to Akhil Chaturvedi, Executive Director & Chief Business Officer, Motilal Oswal AMC, “”Continuous monthly market correction has led to slowdown of the sales for the first time in Feb, this could also be partially attributed to a truncated month. Allocations are being tilted towards Multi Asset Allocation, Large and Flexi categories. Investors are being cautious in allocations and may postpone or stagger in near future..”
ALSO READEquity mutual fund inflows decline 26% in February 2025 amid stock market meltdown: AMFI
Here is a quick look at the top takeaways from the February data and the broader implications-
#Big jump in SIP cancellation
The SIP Cancellation ratio shot up to 122% in February, meaning more cancellations than registered.The sharp uptick can be assessed if one compares the ratio in the last three months. The SIP Cancelled/Registered ratio stood at 79% in November, 2024; 83% in December 2024 and 109% in January 2025.
The New SIP registrations in February came in at 44.56 lakh. This is also significantly lower, down 16.4% from 3-month average and what’s even more worrying is that 54.7 lakh SIPs were discontinued. This resulted in net SIP reduction of 10.1 lakh, twice of last month However, like last month, the increase in discontinued accounts is attributed to reconciliation with exchanges and RTAs pertaining to 2024.
#Inflows to Smallcap funds at 3-month lows
However, the pain across the broader markets is well manifested in the declining flows in the smallcap funds as well. The inflows to this fund is down 23% from the 3-month average. When compared to January, the monthly inflows are down 35% to Rs 3,406 crore from Rs 5,147 crore. Meanwhile the February midcap fund inflows were at Rs 3,722 crore from Rs 5,720 crore in January,
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