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If your SIP still suits a long-term goal, you can afford each instalment, and you remain comfortable with the scheme’s risk, continuing through a market downturn can preserve your investing routine and buy more units when the NAV is lower. But an SIP does not guarantee profit or prevent losses. A falling market is a reason to check whether the investment still fits your circumstances—not, by itself, a reason to continue or stop.
What an SIP does—and what it cannot do
A systematic investment plan (SIP) is a way to invest a fixed amount in a mutual fund scheme at regular intervals rather than investing the full amount at once. With a fixed contribution, you buy more units when the scheme’s net asset value (NAV) is lower and fewer when it is higher. This is rupee cost averaging: a purchase mechanism, not a promise about future returns. AMFI explains how SIPs and rupee cost averaging work.
For example, AMFI illustrates that a ₹1,000 contribution buys 50 units at a NAV of ₹20 and 100 units at a NAV of ₹10. The lower NAV means more units for the same contribution; it does not show that the investment will recover or become profitable.
AMFI explicitly cautions that “the Rupee cost averaging does not assure profit, nor does it protect one against investment losses in declining markets.” Mutual fund schemes are not assured-return products: NAV can rise or fall, and you can lose principal. Regular investing does not remove the risks of the underlying investments. AMFI’s mutual fund risk information describes these risks.
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When continuing may fit your plan
Continuing can be reasonable when the SIP is part of a plan for a goal that is far enough away to withstand market volatility, the scheme remains suitable for that goal and your risk appetite, and you can make the contributions without straining your finances. The case for continuing is about maintaining a plan through volatility—not about knowing when the market will turn.
A hypothetical illustration in a July 7, 2025 NISM article shows why buying more units should not be mistaken for avoiding losses. In its six-month bear-market example, investing ₹10,000 monthly for a total of ₹60,000 buys 3,334.1 units at an average acquisition cost of ₹18. At the example’s December NAV of ₹16.5, the stated holding value is ₹55,013—below the amount contributed even though the investor accumulated more units as NAV fell. This is a hypothetical illustration, not a forecast.
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When to reconsider or pause
Review the SIP if your circumstances or the investment’s suitability have changed. A downturn alone cannot tell you whether a particular fund belongs in your portfolio, but these questions can help identify when a fresh decision is needed:
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- Will you need the money soon? If the goal is near, equity-market volatility may not suit the time available. SEBI advises against taking risky equity exposure for short-term needs and cautions against volatile or illiquid investments when money may be needed soon. SEBI’s risk-management guidance covers matching investments and time horizons.
- Does the scheme still match your goal and risk appetite? Review its suitability against your objective and willingness to bear losses. A market decline alone does not establish that you should keep or abandon a scheme. SEBI’s investor guidance advises selecting investments according to objectives and risk appetite and reviewing whether your needs and portfolio still align.
- Can you afford the instalment? Do not borrow to keep an SIP going or let contributions compromise nearer-term obligations. SEBI advises investors not to borrow for investment. If your cash needs have changed, reassess the contribution rather than treating the schedule as an obligation at any cost.
- Can you tolerate further losses? If the possibility of additional declines would make you abandon the plan or disrupt essential finances, the scheme’s risk may not fit you. Averaging does not cap losses or assure a recovery.
How to make the decision
- Start with the goal date. Identify when you expect to use the money. If you need it soon, consider whether exposure to equity-market volatility is appropriate for that timeframe.
- Check the scheme against the goal. Reassess the scheme’s risk and whether it remains consistent with your objective and risk appetite; do not use the latest market fall as the only test.
- Check your budget and liquidity. Continue only if the instalment is affordable without borrowing or sacrificing nearer-term needs.
- Set realistic expectations. Be prepared for the investment value to fall, potentially below your contributions, and do not treat rupee cost averaging as a loss shield.
- Seek individual guidance if needed. If the decision depends on your circumstances or on choosing a scheme, SEBI says you may consult a SEBI-registered Investment Advisor. The guidance here is general investor education, not a recommendation about a specific fund or personal portfolio.
What a past market decline can—and cannot—tell you
NISM reported that, from its September 2024 peak through March 13, 2025, the Nifty 50 fell 14.6%. Over that same historical period, NISM reported declines of 17.6% for the Nifty 500, 20.4% for the Nifty Midcap 150, and 24.3% for the Nifty Smallcap 250. These figures describe that specific period, as reported in NISM’s July 7, 2025 article; they are not current drawdowns, forecasts, or evidence that a particular fund will recover on a schedule.
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