What should SIP investors do amid market volatility? From diversification to allocation — Here's what experts said

Data from the Association of Mutual Funds of India (AMFI) shows that equity mutual funds drew nearly ₹23,000 crore investments in May. And while this was down 40% year-on-year basis, it was also the 63rd consecutive month of net inflows since March 2021.

Overall, it seems that domestic investors are not much spooked by market volatility. Notably, even when the Nifty slipped 6.4% month-on-month in March, systematic investment plan (SIP) contributions rose 7.5% to ₹32,087 crore in contrast to foreign portfolio investors (FPIs) selling a record ₹1.18 lakh crore.

The AMFI data highlighted that domestic investors are significant participants in India's capital markets, with ₹30,953.83 crore in monthly SIP inflows, 9.64 crore accounts, ₹17.12 lakh crore in SIP assets under management (AUM), and annual cumulative SIP investments exceeding ₹3 lakh crore.

What is driving optimism for small investors' and their SIPs?

According to Sriram BKR, Senior Investment Strategist at Geojit Financial Services, “Overall, the optimism surrounding SIP flows could be attributed to the increasing adoption of individuals to save their income systematically, better awareness among investors on goal planning and the importance of investing in growth-oriented assets (like equities), ease of investing with rise in online platform options, etc.”

He added that performance of equities has been another factor that brought in many millennials and young investors to participate in the market, via SIPs.

Varun Gupta, CEO, Groww Mutual Fund concurred, noting that recovery from past disruptive events (i.e. COVID-19) has reinforced the importance of staying invested through market cycles.

“Additionally, SIPs have increasingly become a financial habit rather than a market call, with investors focusing more on ensuring discipline over short-term market movements,” he said, adding that investing is now linked with long-term financial goals and wealth creation, where equities continue to be one of the most effective asset classes.

Nehal Meshram, Senior Analyst at Morningstar Research Investment pointed to a steady shift from physical assets like gold and real estate to financial assets as a reason that participation through mutual funds has increased. “Importantly, the automated nature of SIPs plays a key role, auto-debiting investments at regular intervals removes the need to time the market, reduces emotional decision-making, and helps investors stay disciplined even during downturns,” Meshram added.

What can SIP investors do to protect themselves?

Subhendu Harichandan, Executive Director, Anand Rathi Wealth highlighted that market volatility is unavoidable and should be viewed as a normal part of long-term investing rather than a reason to stop investing. “Investors who remain disciplined during periods of uncertainty have always been rewarded when markets recover,” he said, adding that investors should follow “a well-designed investment strategy instead of reacting to short term market movements”.

Here are the top five things that investors can do to protect themselves:

• Stay invested: Harichandan advised investors to continue their SIPs. “Our study shows that if an investor earned negative returns after investing through an SIP in the Nifty 50 for one year, simply remaining invested for another 4 to 5 years would have turned those returns positive in the range of 17% to 21%.”
• Reset your expectations: Geojit's Sriram noted that investors may need to reset the return expectations to realistic levels after taking into account the 3–5-year SIP returns from 2023 or 2024. “Equities have a certain probability of long-term returns and that should be a reference number. Sharp rallies at times could lift the recent returns and that should not be considered as a norm,” he said.
• Stick to your investment strategy: Harichandan advised investors to remain committed to their long-term investment strategy rather than chasing recent outperformers. “Maintaining an allocation of around 50-55% in large caps, 20-25% in mid-caps and the balance in small caps can help build a well-diversified equity portfolio that is better equipped to navigate different market cycles,” he added.
• Review your exposure periodically: Sriram feels that exposure should be in line with your risk profile and duration of the SIP investments. “Data shows, on average, mid-caps tend to spend more time in correction zone, beyond 10% than large caps. And small-caps tend to spend much higher time in correction zone, compared to both large and mid-caps. While they help in cost averaging, such phases will show lower returns and investors should be aware of the same,” he added.
• Give compounding enough time: Harichandan feels that the real power of SIP investing comes from staying invested over long periods, as compounding accelerates wealth creation in the later years. “A monthly SIP of ₹10,000 compounding 13% annually will take around 15 years to build a corpus of ₹50 lakh, but it can grow from ₹50 lakh to ₹1 crore in just about another 5 years, showing how wealth creation accelerates with time,” he explained.

“Market corrections are often the best time to invest more. Stepping up SIP contributions with every salary increase helps accumulate more units at lower valuations and significantly enhance the long-term wealth creation journey,” Harichandan added.

Quick tips: Top 5 things investors can do

• Maintain or increase SIP amounts during dips.
• Rebalance asset allocation periodically.
• Build and protect a liquid emergency buffer to avoid redeeming equity investments during downturns.
• Diversify across categories and geographies.
• Manage information intake and behavioural biases. Frequent tracking and market noise can trigger impulsive decisions driven by fear.

Groww's Gupta noted that the most important is to stay disciplined and avoid making emotional decisions. “Ultimately, successful investing is as much about behaviour management as it is about portfolio management. Staying invested, maintaining appropriate asset allocation, remaining focused on long-term objectives, and following a disciplined investment approach can help investors navigate volatility more effectively,” he said.