The Great SIP Illusion!

India’s investors are putting more money into mutual funds than ever before. In September 2026, monthly SIP (systematic investment plans) contributions hit a record Rs 32,490 crore. Yet the market remains under pressure, and foreign investors continue to sell.

The Indian stock market is giving a déjà vu feeling – hovering around the levels seen in March 2026, March 2025 and March 2024. The moot question is whether the market is merely going through a time correction or whether the real correction is yet to come.

The new generation of investors who got fascinated by the stock market and its post-pandemic rally and have been religiously investing in the market through SIPs, are waiting patiently for the stock market to eventually show its magic ‘in the long term’. 

I realize how everything has become so dramatically superfluous in the way we think. How it’s so easy to lie – whether it’s our relationship with ourselves, society, kids, parents, friends or strangers. Rather it’s become quite fashionable to lie and get away with it. 

These days the people in the business of managing other people’s money indulge in soothing and comforting lies because incentives are designed according to the size of the AUM and fresh sheep must be brought in into the abattoir so that the slaughter of the previous ones remains hidden. The long-term investing must remain so long that wealth destruction over a few years and massive drawdowns become a fait accompli for many investors.

A whole generation of investors was led to believe that investing through SIPs was a sure-shot way to build and secure their future wealth. In the interest of short-termism, a handful of ‘stock market experts’, driven by their own incentives and aided by popular marketing campaigns, have created unrealistic expectations among an entire generation of youngsters. 

There are only a handful of five or six people who, in my view, bear a disproportionate responsibility for misleading investors about companies, investments, the fundamentals of investing, the principles of investing and even our own growth story as a nation. ‘15% CAGR is a given’ is an impression (easy extrapolation of past) that has been entrenched deep in the psyche of new age Indian investors.

It bothers me and makes me angry to hear that fixed deposits (FDs) and rainy-day corpus are passé and ‘100% all in equity’ is the new game in town. This has been a serious breach of trust with Indian investors by a handful of people. 

A lot of people in the markets are of the view that the bottom is probably in because, for three years, markets have not moved anywhere. Some think that valuations are attractive at 19x earnings and that the forward P/E could be 12x. Some others opine that the time correction is over, and now there is only one way to go, with the final flush around the corner. All in all, they believe this is the best time to buy, because this is also the most convenient thing to say. 

I think the pain is not over. In fact, the pain has not even started.

The way the country’s economy is shaping up amid changing geopolitical dynamics, the trailing P/E might be 20x, but the forward P/E might be 30x instead of the assumed 12x if earnings growth is overstated and future earnings expectations are cut. Inflation, too, needs to be looked beyond the headline number. Official CPI inflation in India was 5.54% in September 2026, while food inflation was 7.74%. But the lived reality of households and their slowly eroding real purchasing power may tell a different story. 

I manage three PMS (portfolio management services) schemes and have an AIF (alternative investment fund) of my own, and yet I believe that the pain is yet to come. We’ve not scratched the surface. The real correction could still lie ahead, because the middle class has been disenchanted by what I see as exaggerated claims about the growth and potential of the Indian economy in the near term. 

The Indian mutual fund industry is sitting on assets worth over Rs 80 lakh crore, while monthly SIP contributions have crossed Rs 32,000 crore. These are substantial numbers. But what happens if even 5% of the relevant asset base is redeemed, potentially leading to selling pressure worth several lakh crore? Would there be enough buyers to absorb that selling at current valuations, especially at a time when FIIs are steadily exiting the Indian stock market?

If Indian equity markets are raising Rs 20,000-25,000 crores through SIPs while FIIs use that liquidity to exit, with half of the people calling it patriotism and the other half dismissing the importance of FIIs, we need to ask some uncomfortable questions. Domestic inflows are supporting the market, but that does not automatically mean that every valuation is justified.

The biggest concern in Indian markets right now is whether the continuous flow of fresh money from thousands of investors through SIPs is masking underlying valuation risks while FIIs comfortably take money out. It is we, the middle-class people in the country, who, stuck between the three buckets of patriotism, misplaced confidence and misguidance, could end up bearing the pain if earnings disappoint and fresh inflows slow down.

The scenario could begin to resemble a Ponzi-like dynamic, with fresh inflows masking underlying risks rather than eliminating them.    

I am not a bullish forecaster or a bearish forecasting. It is hard to forecast a particular level for the stock markets. But what if the forward P/E is 30x instead of 12x, due to a host of global factors such as El Nino, surging crude oil prices, geopolitical conflicts and rising interest rates? Our central bank may be left with little choice but to respond to inflationary pressures by tightening monetary policy. The benchmark Nifty-50 index at 18,000 levels may not be inconceivable in such a scenario. It is a risk investors should examine, not a certainty that anyone can predict.  

Gold and silver have traditionally been viewed as stores of value and potential diversifiers, protecting one’s capital and purchasing power over certain periods. However, the retail allocation for gold is mostly in jewellery, which is not very efficient as a pure investment because of making charges and other costs. Retail investors should consider a measured allocation to gold and silver. The fact that the government has urged people to refrain from buying gold is a sign of the pressure that gold imports can place on the country’s external finances. China, meanwhile, has continued to see significant official gold buying and investment demand for gold ETFs.

I have put my money where my mouth is, and my advice to my clients is to retain a substantial part of their investments in gold and silver. In the current scenario, the middle class should look at protecting their wealth rather than growing it at any cost.

So, should SIPs be discontinued? Not really. Equity SIPs need not be stopped simply because markets are volatile. But what is required is a review of your mutual funds’ performance, the investing philosophy of the fund managers and how they have fared against their past commitments. There are no infallible ‘experts’ on the Street. Do not blindly trust anybody. Use your own intelligence and judgement. Read and figure out what geopolitics is telling us, how the global world order is evolving, how currencies are depreciating and what rising bond yields in Japan and the US could mean for you.

At the end of the day, it is your money, your risk and your future. And when the tide turns, it is not the loudest forecaster who will protect your wealth. It is the investor who understood the risks before everyone else did.