'People are not dumb...': Samir Arora of Helios Capital on high dropout rates in SIPs

Samir Arora of Helios Capital says that the high SIP stoppage ratio does not necessarily indicates that that investors have stopped their SIPs and that much inflows into the mutual fund industry has ceased. Instead, they must have started SIP in new funds and stopped their fund inflows in the older, poorer performing funds.

"People are not dumb- they are still doing dollar cost averaging but just doing them in different funds may be," Arora, the founder of Helios Capital said in a tweet.  Arora was commenting on an article, which pointed to a hidden crisis in India's SIP boom.

Arora said, "Total number of mutual fund investors in India is about 5 crores. So obviously it cannot be the case that 5 crore new SIP investors came in and 4 crore old investors stopped. It must be the same investors moving from one fund to another starting SIP in new, better funds and stopping in some older poorer performing funds ( as they should)."

Meanwhile, the SIP stoppage ratio slipped to 74.85% in October compared to 76.27% in September, according to an ET report. The monthly mutual fund SIP contributions reached an all-time high of Rs 29,529 crore in October.

The mutual fund industry saw 45.10 lakh SIPs being discontinued or completed in October with new SIP registrations rising to 60.25 lakh.  In comparison, September witnessed 44.03 lakh SIPs being discontinued or completed and 57.73 lakh new registrations, the report added.