Should You Time Your SIP Investments?

Systematic Investment Plans (SIPs) have emerged as the backbone of the Indian equity market, with inflows exceeding ₹ 20,000 crore per month since the start of this financial year. These steady contributions have provided resilience to the equity market, often counterbalancing the selling pressure from Foreign Institutional Investors (FIIs). Nonetheless, recent performance data presents an uncomfortable reality - several popular SIP-driven equity funds have delivered negative returns over the past year. [EasyDNNnews:PaidContentStart]

Our analysis of the Small-Cap, Large-Cap, Mid-Cap, and flexi-cap categories, investors' favourites, shows that most funds in these segments have generated negative returns. Some of the funds that were once market darlings are now deep in the red. But this is not unprecedented - equity market cycles have historically seen phases of exuberant returns followed by periods of subdued performance. This pattern repeated itself after 2008, again post-2017, and could unfold after 2024. 

The question then arises - should you discontinue your SIPs in underperforming funds? The answer depends on two key factors. First, your investment horizon. Short-term downturns should not deter you if you are committed for a decade or more, as time remains the best risk mitigator. However, experience suggests that most investors struggle to maintain such discipline, often exiting at the wrong time. Second, the valuation of the investment category matters. If your SIPs are allocated to an excessively overvalued segment and your time horizon is not sufficiently long, a strategic pause may be warranted. 

The lesson is clear - while SIPs thrive on discipline, they don’t have to be blind investments. Investors who assess valuations can tactically adjust their contributions - allocating more when categories are undervalued and booking profits when they become overheated. Timing the market is difficult, but timing your SIPs intelligently can enhance returns without disrupting long-term compounding. 

Shashikant Singh
Executive Editor

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