At first glance, the fear seems logical. Equity returns have disappointed, mid- and smallcap stocks have corrected sharply. But a closer look at the data shows SIPs appear far more resilient than past market cycles.
Even as market sentiment weakened throughout the last year, December SIP flows hit a fresh record. SIP inflows rose to Rs 31,000 crore in December 2025, up from Rs 29,400 crore in November. The broader mutual fund ecosystem also held steady. Monthly average assets under management for the industry remained around Rs 82 lakh crore. Equity assets under management stayed firm at about Rs 35.5 lakh crore.
Analysts say this stability indicates that SIPs are not tactical trades, but have become automated habits linked to salaries, long-term goals and financial discipline. Unlike lump-sum investing, SIPs do not require investors to make repeated decisions during market stress.
Balasubramanian, Managing Director and CEO of Aditya Birla Sun Life AMC said record inflows are a testament to SIPs increasingly becoming a way of life for Indian investors, while adding that continued investments despite volatility point to rising financial awareness and discipline.
Poor market returns don’t mean poor SIP outcomes
While stock prices struggled in 2025, SIP investors. Data from an earlier ET report showed that 97% of mutual fund schemes delivered positive returns for SIP investors during the year, with XIRRs going as high as 37%. Out of 490 active equity schemes open for SIPs at the start of 2025, only 13 ended the year in the red.
The Nifty’s roughly 9% gain in 2025 masked deep pain in mid and smallcap stocks, where many retail traders chased momentum and suffered losses. SIP investors, by contrast, benefited from buying more units during corrections — the basic principle of rupee-cost averaging.
Gautam Kalia of Mirae Asset ShareKhan said “Historically, every meaningful correction has rewarded disciplined investors who stayed invested. Staggered investing through SIPs is suitable in such markets as it helps in value averaging.”
This is why, according to experts, SIPs often look strongest precisely when markets feel weakest. Lower prices improve long-term return potential, provided investors stay the course. But if the market continues to underperform, given the global uncertainty, will the cracks start to appear?
Analysts say the nervousness among investors cannot be ruled out or dismissed. Chakravarthy V of Prime Wealth Finserv points out that while inflows are strong, investor behaviour is showing mixed signals. “Most of the anxiety right now is coming from the speed of the move, not because something structural has changed,” he said.
To understand the pressure on pure-play equity returns, one must look beyond domestic factors. Foreign institutional investors sold Rs 22,530 crore worth of Indian equities in the first half of January alone. In just four trading sessions, outflows touched Rs 14,266 crore.
In 2025, FIIs sold equities worth Rs 1.66 lakh crore, dragging markets lower and weakening the rupee by about 5%. Expectations that foreign investors would return in early 2026 were dashed by worsening geopolitics and delays in the US–India trade agreement.
Global uncertainty has played a big role. According to Ponmudi R of Enrich Money, tensions involving the US, Venezuela and Iran, along with trade-related uncertainty, have kept investors cautious. While attention is shifting to the India–EU trade agreement, markets remain driven by earnings outcomes and geopolitical headlines rather than optimism.
So, will SIPs get impacted?
The consensus answer from across analysts is not clear. They say SIPs may see pauses at the margin, and incremental additions could slow if volatility persists. But the core engine is unlikely to stall.
Swapnil Aggarwal of VSRK Capital said, “In tough market conditions, SIPs are neither hit nor affected in any adverse way. On the contrary, SIPs are generally very helpful in such markets. Corrections allow investors to buy more units at lower prices.”
Will FIIs return and does it matter as much now?
Despite the relentless selling continuing in 2026, there is a hope that policy action could change the narrative. Morgan Stanley’s Ridham Desai has pointed to the Union Budget as a potential turning point, suggesting reforms such as broadening the foreign investor base, simplifying buyback taxation and enhancing incentives at GIFT City.
If these measures materialise, they could help stabilise foreign flows. But even if FIIs stay cautious for longer, the market is no longer as vulnerable as it once was.
Puneet Sharma of Whitespace Alpha argues that this is the biggest structural shift in India’s markets. “Indian equities are no longer driven by foreign inflows alone. SIPs, mutual funds and household participation now form a strong, stable base,” he said. Heavy FII selling no longer destabilises markets the way it did a decade ago.
How long can domestic flows absorb FII selling?
Domestic mutual funds have absorbed sustained foreign selling for the past one year, supported by steady SIP inflows, insurance money and retirement savings.
Ishan Tanna of Ashika Equity Research cautions that this cushion is strong but not infinite. “The ability of mutual funds to offset foreign outflows is not unlimited,” he said. Prolonged and heavy selling could increase volatility and pressure specific stocks. However, unless there is a sharp deterioration in India’s macro fundamentals, domestic flows should continue to limit downside risks.
Gurmeet Singh Chawla of Master Capital Services said that regular SIP inflows provide steady liquidity. “Moderate FII selling can be absorbed for extended periods, though short-term volatility may remain,” he said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)