How SIP has been the strong hero across historical market cycles

Deepak Agrawal, CIO-Debt & Product Head, Kotak Mahindra AMC

Markets person taken a crisp downturn, sparking fearfulness and uncertainty among investors. The sentiment has shifted from euphoria to caution, with galore questioning whether to enactment invested oregon hold for further declines. Historically, specified corrections person been moments of panic for some—but aureate opportunities for those who stay disciplined.

ETMarkets.com

Data arsenic connected 28th Feb’25. Source: ICRA MFI. PRI Values person been utilized for the computation

The supra information demonstrates whether an capitalist invests from the apical oregon bottommost of the crisis, determination is nary worldly quality successful the returns. Longer concern periods let markets to implicit their cycles of downturn and recovery, starring to normalization of returns that diminishes the archetypal interaction of the situation introduction point.

Market downturns origin short-term disruptions. However, investors who stayed invested successful SIPs saw important growth successful recoveries.

Why should we proceed with SIP successful falling markets?

1. Crises Create Buying Opportunities

- SIPs fto you bargain much units erstwhile markets fall, lowering your mean cost. This effect i.e. rupee-cost averaging—ensures higher returns erstwhile markets recover.

- SIP returns crossed each indices rebounded powerfully post-crisis, reinforcing incremental benefits by staying invested.

2. Small & Midcaps Deliver Higher Returns, but with Increased Volatility

- The Nifty Midcap 100 and Nifty Smallcap 100 consistently outperformed the Nifty 50 successful presumption of semipermanent returns

- However, these segments besides exhibited higher short-term fluctuations, requiring a longer concern skyline for optimal gains.

- Investors with a semipermanent position person historically been rewarded with higher maturation imaginable successful these segments.

3. SIP Beats Market Timing

- Trying to clip the marketplace seldom works. A disciplined SIP attack has historically delivered amended results.

- Even successful utmost downturns, continuing investments resulted successful beardown recovery-phase returns.

- SIPs region guesswork successful marketplace timing, keeping investments accordant crossed cycles.

4. Power of Compounding

- With compounding, marketplace fluctuations go little important implicit agelong concern periods

- As the marketplace recovers, not lone bash the archetypal investments appreciate, truthful bash the returns, that adds up to the wide instrumentality generated

Strategic Takeaways for Investors

Stay Invested & Top up successful Downturns—This Lowers Your Cost & Boosts Long-Term Gains “Market downturns should beryllium viewed arsenic opportunities alternatively than threats.

Diversify Across Market Segments: While large-cap stocks connection stability, mid and small-cap investments supply higher maturation potential, making a diversified attack ideal.

Leverage Market Cycles for Long-Term Gains: The supra array confirms that economical crises are temporary, but the market’s trajectory towards maturation is long-term. Investors who stay diligent and accordant reap the rewards of compounding.