Markets down, SIPs bleeding? Experts say this is exactly when smart investors win

Systematic Investment Plans (SIPs) continue to be one of the most preferred wealth-building tools for Indian investors, with monthly registrations hitting record highs. The surge reflects rising financial awareness and growing confidence in mutual funds as a long-term investment vehicle. However, despite the popularity of SIPs, the past 12–15 months have left many investors disheartened, as their portfolios have delivered zero or even negative returns.

A significant portion of the disappointment stems from how various equity categories have performed over the last year. Small-cap funds, in particular, have shown muted returns, averaging around 0.1%, compared to roughly 8% for the Nifty 50. The correction between September 2024 and April 2025 was especially painful: small-cap funds fell by nearly 25% on average, while flexi-cap funds declined between 16% and 18%. Even strong performers such as Parag Parikh and HDFC Flexicap saw drops of 7–12% during this period.

According to Rajani Tandale, Senior Vice President, Mutual Fund at 1 Finance, such fluctuations are part of the natural rhythm of equity investing. “Short-term volatility is inevitable,” she explains. “If short-term volatility feels unsettling, it usually indicates a mismatch between the investor’s risk appetite and their fund selection.” She notes that investors uncomfortable with sharp swings may be better suited to more stable categories like large-cap or flexi-cap funds.

Short-term volatility

For investors worried about dull returns, experts urge a structured approach. Before panicking, compare your fund’s performance within its own category and against similar schemes. If the underperformance is marginal, exiting may be unnecessary. Markets experience phases, and dips often correct once conditions stabilise. However, if your fund consistently trails peers by a wide gap, it may warrant a deeper review. Sudden changes made out of emotion, Tandale warns, can lead to long-term setbacks. A financial advisor can help determine whether a switch is justified.

Diversification is equally important. A well-constructed portfolio—spread across equity, debt, and alternative assets—absorbs volatility better. But diversification must be meaningful. Overloading your SIP portfolio with eight to ten similar schemes dilutes impact, causes duplication, and creates confusion. Instead, the objective should be a balanced mix that aligns with your financial personality and goals.

When should investors rebalance?

Tandale emphasises that SIP performance cannot be judged over a 12–15 month horizon. SIPs operate best across market cycles, benefiting from rupee-cost averaging and compounding. Rebalancing should be considered only when personal circumstances change—such as modified life goals, shifts in income, or an updated risk profile. Additionally, if a fund’s long-term strategy deviates significantly from expectations, a review is warranted. Otherwise, annual or semi-annual check-ins are more productive than reactive decisions.

Should you pause your SIP?

One of the most common mistakes investors make during downturns is pausing SIPs. Behaviourally, losses feel twice as painful as gains, prompting fear-driven decisions. But stopping SIPs during corrections actually undermines future returns. Lower markets allow SIP investors to accumulate more units at reduced NAVs, enhancing long-term gains once markets rebound. Pausing SIPs denies investors the very benefit SIPs are designed for: rupee-cost averaging.

Experts recommend treating SIPs like fixed monthly expenses—non-negotiable and automated. Linking each SIP to a life goal also helps investors stay focused on long-term outcomes rather than short-term noise.

SIP portfolios

With global uncertainties affecting equity performance, investors must maintain discipline. Tandale advises reviewing asset allocation according to personal milestones and risk capacity—not generic rules. She also cautions against adding hybrid funds unnecessarily, as they may overlap with existing equity and debt holdings and carry higher expenses.

Maintaining an emergency buffer of 6–9 months of expenses in liquid or short-term debt funds prevents forced redemption of long-term investments during volatility. Scheduled reviews, behavioural awareness, and disciplined investing are essential to building wealth steadily.

As markets fluctuate, experts agree: SIP investors who stay consistent, avoid emotional decisions, and maintain thoughtful asset allocation will be best positioned to benefit when markets eventually recover.