3 reasons why your mutual fund may stop your SIP

Published: 21st Aug 2024

By: Value Research

Putting the brakes on investments

Recently, HDFC Defence Fund, India’s first defence-only fund, halted fresh SIP registrations, much to the dismay of potential investors. There can be various reasons for this. Here, we look at three reasons why a fund may not be accepting new investments.

#1 Inflated valuations

Funds can restrict fresh inflows if they feel the market is overvalued. In such cases, fund managers may see little value in making incremental investments.

#2 Lack of good investment opportunities

When the markets are overvalued, companies end up trading at stretched valuations. As a result, finding lucrative investment opportunities becomes a challenge. To avoid sitting on large piles of cash during such periods, funds end up stopping fresh inflows.

Small-cap funds take a break from investing

In recent years, some small-cap funds have stopped SIPs when they feel the market is overheated. Small-cap funds of Tata, Kotak, SBI, Nippon India and ICICI Prudential are a few examples.

In certain cases, regulatory bodies like SEBI and AMFI may mandate fund houses to stop accepting fresh SIPs temporarily. To read the full story, click here:

#3 Regulatory measures