The Nifty 50 corrected 11.3% in March following war escalation, translating into negative one-year SIP returns across equity categories. According to Mint, flexi-cap funds delivered an average one-year SIP return of negative 17.63%, while large-cap funds fared little better at negative 17.2%. The large and mid-cap category returned negative 16.2%, with mid-cap funds losing 14.45% and small-cap funds shedding 17.88% over the same period. Multi-cap funds delivered average one-year SIP returns of negative 16.69%. The correction also dragged three-year SIP returns into low single digits across categories, with flexi-cap funds delivering just 1.97% annualized three-year returns.
The SIP stoppage ratio spiked to 100% in March, meaning more SIPs were discontinued or matured than new ones started. As reported by Mint, this ratio has usually ranged 60-70% in recent years, reflecting the growing popularity of SIPs where more investors have opened SIPs than closed. However, experts note that this data by itself is not alarming, with monthly SIP contributions rising 7.5% in March to ₹32,085 crore, suggesting experienced investors held firm. New SIP account openings also slowing down in March indicates some investors may be in the wait-and-watch mode, though experts emphasize this represents a small adjustment rather than a break in the SIP story.
According to reports from Mint, a 5% annual increase in SIP amount can significantly impact retirement corpus accumulation. The comparison between two investors demonstrates this clearly - Sita and Gita both started with ₹10,000 monthly SIP in a flexi-cap fund but followed different strategies. Sita opted for a step-up SIP with 5% annual increases, while Gita maintained a regular SIP with constant monthly contributions. Over 25 years with a 12% CAGR return, Sita accumulated ₹2.73 crore while Gita ended with ₹1.90 crore, resulting in an ₹83 lakh difference in retirement corpus. The step-up SIP strategy allowed Sita to increase her monthly contribution from ₹10,000 to ₹15,000 by the sixth year, maintaining the 5% annual increase structure throughout the investment period.
As reported by Mint, the core mechanism of SIP investing - rupee cost averaging - comes into play precisely when markets are falling. Amol Joshi, founder of Plan Rupee Investment Services, explains that "rupee cost averaging works well when markets are volatile, sideways or in a bearish phase." A fixed monthly investment buys more units when prices are lower, pulling down the average cost per unit. Consider a ₹5,000 monthly SIP: at a NAV of ₹100, it buys 50 units. If the NAV falls to ₹80 the next month, the same ₹5,000 buys 62.5 units - 25% more for the same outflow. The SIP math works against investors in early years because most invested capital has very little time to compound, but this changes as the portfolio grows and becomes less vulnerable to short-term swings.
Experts urge investors to remain committed to SIPs, emphasizing the benefits of rupee cost averaging during market downturns despite initial poor returns. Dhirendra Kumar, founder of Value Research, noted that "monthly SIP flows keep climbing, which tells you the underlying habit is intact." Swarup Mohanty, CEO of Mirae Asset Investment Managers, said that "new investors who started investing looking at past trailing returns may have been disappointed, but such phases also help investors learn the importance of long-term investing." Those invested in funds with sound long-term track records need not panic amid market volatility, with the right move remaining to stay invested, keep the SIP running, and let rupee cost averaging do its job. The strategy reflects realistic income growth assumptions of 5-10% annually, which typically matches inflation and lifestyle increases.
