The Indian equity markets have been experiencing significant volatility, presenting a challenging environment for investors, particularly those participating in Systematic Investment Plans (SIPs). For investors who began their SIP investments when market levels were at historic highs, this volatility has been particularly unsettling.
As of January 2025, the benchmark NSE Nifty50 has fallen by 12.29% from its all-time high of 26,277 in September 2024. Mid- and small-cap investors have faced even more substantial losses, with the Nifty Midcap100 index down nearly 16%, and the Nifty Smallcap100 index falling approximately 18% from its peak.
Despite this market downturn, investors have largely continued with their SIP investments, showing resilience in the face of adversity. Analysts believe this steady approach remains a sound strategy, urging investors to maintain their SIP commitments despite the market’s turbulence.
SIP Inflows Remain Strong
Data from the Association of Mutual Funds in India (AMFI) highlights that equity-oriented mutual fund schemes attracted net inflows of Rs 39,688 crore in January 2025. While this figure marks a 3.6% decrease from December 2024, it still exceeds the average monthly inflows for the previous year. Notably, small-cap funds saw the second-highest inflows among all equity sub-categories, with Rs 5,721 crore coming in—a 22% increase from the previous month. Mid-cap funds also performed well, drawing Rs 5,148 crore in net inflows, slightly above the Rs 5,093 crore seen in December 2024.
An Opportunity for Long-Term Gains
Market analysts are optimistic about the potential of mid- and small-cap funds, emphasizing that SIPs are designed to take advantage of market declines. For those invested in these segments, analysts suggest that the current market corrections present an opportunity to accumulate more units at attractive valuations, enhancing long-term returns through rupee cost averaging.
Rajesh Bhatia, Chief Investment Officer at ITI Mutual Fund, notes that India is currently in the midst of a structural bull run. He believes that mid- and small-cap companies are well-positioned to capitalize on the country’s growth story. While these sectors have experienced corrections amid market volatility, Bhatia sees this as an ideal time to continue SIPs and buy more units at discounted prices. He emphasizes that SIPs do not require market timing; instead, they focus on maintaining a disciplined investment strategy, which can yield substantial returns over time.
Long-Term Benefits of SIPs
A report from Edelweiss Mutual Fund further supports this view, highlighting that even when SIP returns are negative in the short term, continuing the investment strategy and staying invested for the long haul can recover losses and generate positive returns. The report found that investing during periods when the market is expensive—i.e., when trading at higher price-to-earnings (PE) ratios—and continuing SIPs over 3, 5, or 10 years has historically delivered strong returns. This strategy, particularly during market corrections, takes full advantage of the rupee cost averaging benefit, which can potentially enhance long-term investment outcomes.
Market Volatility: A Normal Part of Investing
Gurpreet Sidana, CEO of Religare Broking, attributes the recent market correction to foreign institutional investor (FII) sell-offs, driven by global uncertainties. He explains that the sharper declines seen in mid- and small-cap segments are inevitable due to their higher beta and inherent volatility. However, Sidana reassures investors that market corrections are not disruptions, but rather a natural part of equity investing.
Historically, mid- and small-cap stocks have demonstrated resilience and robust growth, making them viable long-term investments. Sidana advises investors to reassess their fund fundamentals in light of the recent corrections, ensuring their investments remain aligned with their risk appetite and financial goals. Maintaining discipline and sticking to the long-term strategy is key, he adds.
Conclusion
The current market volatility may be unsettling, but for investors committed to the long-term growth potential of their portfolios, continuing with SIP investments remains a sound strategy. Analysts and experts agree that market corrections are part of the investment landscape, and staying the course can offer significant rewards in the years to come. As always, disciplined investing, aligned with one’s risk tolerance and financial objectives, remains essential to achieving lasting success.
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