Investors should continue SIPs, keep a balanced approach with higher allocation to large caps, be selective in mid- and small-cap exposure in their portfolio, and avoid panic selling, as per mutual fund experts in the current market.
They say that, according to historical data during market volatility or downturns, instead of stopping or redeeming, holding SIPs for at least seven years has proved to yield positive results.
Major market indices have been bleeding in 2025 with small- and mid-cap indices taking most of the beating. Experts said the volatility is due to many factors namely: huge FII sellouts of Rs 1.97 lakh crore from October 2024 to February 2025, continued weakening of the rupee against the dollar, US tariff impositions, and overall weaker Q3 earnings. Even though tax benefits announced in the Union Budget 2025 and RBI inflation control measures have provided some respite overall the markets have been highly overvalued.
Monthly data from the Association of Mutual Funds in India (AMFI) suggests that contribution to SIPs has dipped from Rs 26,451 crore in December 2024 to Rs 26,400 crore in January 2025 with SIP AUM falling from Rs 13.63 lakh crore in December 2024 to 13.18 lakh crore in January 2025. There has been an overall de growth in SIP numbers by 5 lakh every month and this is the very first time in the past 1 year that this trend has been negative.
Akhil Chaturvedi, ED & CBO of MOAMC, said as per a study of SIPs over the last 20-odd years (including periods like major market crashes like the 2008 financial crisis, the 2013 slowdown, and the COVID-19 crash) the key takeaway is that SIPs work best with patience. Over 7 years, mid-cap SIPs never ended in a loss, while small-cap SIPs had only a 5.8% chance of ending negative, with the worst-case return at -7.3%, he said. “Interestingly, the worst returns happened in March 2020, but just holding on for one more year reversed losses completely. The lesson is simple — stay invested, ride out the volatility, and let time do its magic,” Chaturvedi added.
Aashish Somaiyaa, CEO at WhiteOak Capital AMC, advised to maintain a balanced portfolio. He suggested that for a moderate-risk investor, balance means having large-cap and small/mid-cap allocations in line with the overall market average, which is 65% large-cap.
If the allocation deviates significantly from this number, adjust by directing incremental SIPs into large-cap or vice versa. Aggressive investors should opt for SIPs in multicap funds, moderate investors in flexicap funds, and conservative investors in large-cap funds, he said.
“The fact that markets, especially the more volatile small-cap space, go through these cycles is precisely why we suggest SIPs in the first place. Now, when cost averaging needs to happen, how can we not remain committed?” Somaiyaa added.
Somaiyaa’s viewpoint is agreed upon by others also.
Sorbh Gupta, Senior Fund Manager-Equities at Bajaj Finserv AMC, also recommended investors to have a large-cap tilt in their portfolios while taking exposure to only select mid-small cap companies. While SIPs should continue in these categories to take advantage of sharp market corrections, any lump-sum investments should be focused on large-cap and quality-oriented schemes, he explained.
“Despite the correction, valuations of mid- and small-cap as a pack are still not reasonable and some more correction may be due. However, there are some pockets within mid- and small-cap where value has started to emerge, and many contrarian ideas can be found. While the near-term outlook is hazy, we are firm believers that mid-small cap companies with robust business fundamentals will continue to generate substantial wealth over the next many years,” Gupta added.
