Bear Markets & SIPs

The stock market is a device for transferring money from the impatient to the patient. When others rush in with greed, stay cautious. When fear grips the market, be bold, for true opportunities often arise in times of greatest uncertainty.

Markets are volatile in 2025, but stopping SIPs now could spoil long-term gains. History shows that patience and discipline during downturns lead to wealth creation. Abhishek Wani discovers why continuing your SIPs, even in a bear market, is a smart choice. Find out about important dos and don'ts for FY 2025–26 mutual fund investment[EasyDNNnews:PaidContentStart]

2025 began on a rough note for Indian equities, with Benchmark Indices nearly six per cent down since the start of the year as of April 07, 2025. Even before global tensions escalated, domestic markets had entered a correction phase. The final blow came when U.S. President Donald Trump triggered a long-anticipated tariff war, sending global markets into disarray. This silent economic war sparked fears of rising inflation, falling demand, and revenue pressure across industries. And once again, Indian investors were left pondering a familiar question: should you continue or pause your SIPs, as the last one-year returns are negative for most categories.

The tariff war might not involve missiles or tanks, but its consequences are no less damaging. Inflation is expected to rise, demand is likely to fall, and industries may face the heat with declining revenues and possible job cuts. But here's the truth every seasoned investor knows — no war, be it with weapons or trade barriers, has ever completely stalled the march of markets, as in commerce, one's profit is another's loss. History shows that even during the darkest financial phases, opportunities bloom for those who remain patient and disciplined.

Yet, market corrections often trigger fear. According to AMFI data, SIP inflows for February 2025 stood at ₹25,999 crore, slightly lower than January's ₹26,400 crore. But what really caught the market's attention was this — while 55 lakh SIPs were discontinued (either due to maturity or investor pull-out), a bold 44 lakh new SIP portfolios were opened in the same month. It's a fascinating contrast: some investors hit the brakes, while a whole new wave saw the crash as a buying window. So, who made the smarter move? The ones who paused and played it safe? Or the 44 lakh investors who doubled down amid the noise and panic?

Through this cover story, we'll dive deep into what bear markets truly mean for SIP investors. We'll revisit past downturns, draw lessons from history, and analyse data that shows how staying invested through turbulent times has often led to remarkable long-term wealth creation.

Historical SIP performance during bear markets
When markets crash, fear takes over. It's human nature to want to stop investments during tough times. However, history shows us that those who stayed the course with their SIPs — even during the worst market crashes — emerged significantly wealthier just five years later. SIPs thrive on market volatility, and when continued during bear markets, they can work like a silent wealth-building engine in the background.

Let's take a step back and look at four periods in India's market history when sentiment was at rock bottom — the Dotcom crash (2000), the Global Financial Crisis (2008), the NBFC crisis (2018), and the COVID-19 pandemic crash (2020). In each of these downturns, a monthly SIP of just ₹1,000 — totalling ₹60,000 over five years — produced surprisingly strong returns, often outperforming even fixed deposits and inflationadjusted savings by a wide margin.

Monthly SIP of ₹1,000
Period: March 2000 to March 2005 — Dotcom Bust & Ketan Parekh Scam (2000–2001)

Period: January 2008 to January 2013 — Global Financial Crisis (2008–2009)

Period: September 2018 to September 2023 — NBFC Crisis (2018–2020)

Period: March 2020 to March 2025 — COVID-19 Crash (Feb–Mar 2020)

Note - The tables above illustrate how wealth was created if a ₹1,000 monthly SIP was initiated during four major bear market phases and maintained for the subsequent five years. The mutual fund schemes included here are popular ones that have historically performed well. This is purely an analysis, not a buy or sell recommendation. ■ Data Source: Advisorkhoj.com

Fast forward to the 2008 Global Financial Crisis — perhaps one of the most feared periods in modern investing history. While stock markets plummeted and global headlines screamed “meltdown,” those who calmly continued their SIPs saw modest yet meaningful wealth accumulation. A SIP in HDFC Flexi Cap during this period returned nearly ₹90,000 — a 50 per cent gain in five years — even amid one of the worst economic collapses in history. Large-Cap and index funds offered slightly lower returns, but still managed to outperform most traditional financial instruments.

The more recent NBFC crisis between 2018 and 2020 tested investors again. Headlines about defaults, liquidity crunch, and slowing economic growth rattled sentiment. But again, SIPs proved resilient. By September 2023, someone who had continued investing ₹1,000 per month since the crisis began would have seen returns like ₹1.16 lakh in Mid-Cap funds (Nippon India Growth Fund) and an impressive ₹1.63 lakh in Quant Small Cap Fund. The numbers speak for themselves — that's nearly 2.7x wealth creation in a challenging macro environment.

Perhaps the most relatable example is the COVID-19 crash in early 2020. Within a few weeks, markets crashed more than 35 per cent, and panic was widespread. But investors who persisted and didn’t halt their SIPs have already seen substantial gains. Just five years later, by March 2025, that same ₹60,000 investment has turned into over ₹1.2 lakh in the Quant Small Cap Fund and about ₹1.07 lakh in Flexi Cap and Mid Cap funds — doubling their money. Even conservative index funds delivered over ₹83,000, underscoring the consistent advantage of staying invested.

What this data clearly reveals is that bear markets offer a golden window for SIPs to quietly gather more units at lower prices. This phenomenon, called rupee cost averaging, means that every rupee you invest during a downturn buys more — and when markets eventually rebound, the gains are magnified. The real magic of SIPs is not in timing the market, but in giving time to your money and allowing compounding to do its job.

Stopping SIPs during a market crash is like quitting a marathon at mile 20 — just when the finish line is approaching. Historically, the biggest returns come in the years following a correction, and missing those rebounds can severely dent long-term wealth creation. By staying the course, even with modest amounts like ₹1,000 a month, investors are able to ride out volatility and reap the rewards of disciplined investing.

In essence, bear markets are not a time to retreat — they are a time to trust the process. SIPs work best when continued in all weathers. They don’t guarantee smooth sailing, but they do promise progress, and over time, they turn the storms of today into the sunshine of tomorrow.

Investment Framework 2025: Dos and Don’ts for SIP Investors Amid Market Volatility
As Indian markets enter a period marked by price corrections, macroeconomic uncertainty, and sectoral churn, Systematic Investment Plans (SIPs) continue to offer investors a steady hand in turbulent waters. But navigating volatility isn’t just about staying the course — it’s also about refining the strategy. Here’s an investment framework tailored for 2025 to help investors avoid common pitfalls and make the most of market corrections.

What to Do: Smart Investing Principles for 2025
1. Continue SIPs Without Interruption: One of the golden rules of wealth creation is to never stop your SIPs in a falling market. Market corrections allow investors to accumulate more mutual fund units at lower NAVs, enhancing long-term returns through rupee-cost averaging. Historical market phases — 2008, 2013, 2018, 2020 — reinforce this principle.

2. Tilt Towards Large-Cap or Flexi-Cap Funds: During uncertain times, investors tend to flock towards large-cap funds for stability. These funds comprise companies with strong balance sheets, steady earnings, and better downside protection. Flexi-cap funds also offer the added benefit of dynamic asset allocation across market caps, which works well in volatile phases.

3. Accumulate Mid & Small-Caps Slowly: While largecaps may offer safety, the deep corrections in small and mid-cap stocks make 2025 an ideal accumulation year — but only for investors with a 5+ year horizon. Use SIPs or STPs to build exposure gradually and avoid lump-sum entries.

4. Evaluate Fund Philosophies Carefully: Investors should check whether a mutual fund remains true to its stated investment philosophy. For example, a value-oriented fund shouldn't hold high-PE stocks or speculative themes. Transparency and consistency in portfolio strategy matter more than ever.

5. Research the Fund Manager, Not Just the Fund: Ultimately, you're not investing in a fund — you're investing in the philosophy, discipline, and integrity of the fund manager. Study their historical decisions, public interviews, letters, and track record across market cycles.

6. Track Portfolio Quality
■ Avoid 'zoo portfolios' with 80–100 small-cap stocks. These funds tend to struggle with liquidity during corrections.
■ Evaluate the top 10 holdings — too many theme- based or high-valuation stocks can signal trouble.
■ Look at the portfolio's overall PE and PEG ratio — is it realistic in the current earnings growth environment?

7. Keep a Long-Term View: Use corrections for rebalancing, not panic selling. Many great companies underperform for 12–18 months before outperforming. Compounding works only for those who give it time.

8. Ensure You're Financially Ready: Before investing, build an emergency fund covering 6–8 months of expenses. This ensures you don't need to exit investments prematurely during financial stress.

What Not to Do: Common Mistakes to Avoid in 2025
1. Don't Chase Hot Themes: Avoid thematic or sectoral funds launched at market peaks. These are often trend-driven and suffer steep corrections once sentiment shifts. Past winners — like Chemicals in 2021 or Railways and Defence in 2024 — may not lead again.

2. Avoid Overdiversification and Illiquid Bets: Some small-cap funds hold 80+ stocks, diluting conviction and making exits tough in downturns. Stick to funds with focused, research-backed portfolios.

3. Don't Panic Sell: During corrections, the biggest threat to your portfolio is emotional decision-making. Avoid reacting to short-term noise. SIPs are designed to thrive in volatility — don't break the compounding cycle.

4. Don't Overlook Fund House Ethics: Track regulatory updates, leadership changes, and controversies at AMCs. Fund houses with shaky governance can pose long-term risk regardless of short-term performance.

5. Avoid Lumpsum Investments in High-Valuation Markets: SIP and STP remain the best tools in volatile orovervalued markets. Lumpsum investments should be reserved for deep corrections or Nifty PE falling below 18–20.

6. Don't Overcommit to One Asset Class: Balance your equity SIPs with Debt Funds or hybrid strategies. Bear markets expose concentrated portfolios to tail risk, especially when small/mid-caps are overrepresented.

Conclusion:2025 – A Year of Patient Accumulation
The key word for SIP investors in 2025 is accumulation. This is not the time to chase returns or react emotionally. Instead, it's a time to rebalance, reallocate, and invest with a clear long-term plan. Whether you're starting a new SIP or continuing an old one, remember that bear markets are temporary, but wealth created through discipline is permanent. In a world of uncertainty, SIPs remain your compass — guiding you through storms, helping you avoid traps, and quietly compounding your wealth beneath the surface.

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