Benchmark indices have fallen over 10 percent from their peak, retail investors have started feeling pangs of the market correction. This is enough to dissuade scores of retail investors from continuing to invest. Nifty has fallen over 10 per cent from its record high of 26,277, while the Sensex slid over 8,500 points from its peak.
It is yet not a bear market which is defined by a fall of 20 percent, retail investor portfolios are already witnessing signs of significant distress.
Some retail investors feel that it is time to wait and watch instead of continuing to invest. Some of the questions that bother investors these days include the following:
Should we wait any longer before the market corrects to its true valuation? Why invest when the market is falling continuously? Since there is more correction that lies ahead, why not wait for some more time?
There may be some substance in these statements but it is perhaps true for the lumpsum investors and not for the SIP investors. Let us explain how.
When investors buy mutual fund units during the market fall, the average price of their mutual fund units declines, thus raising the prospects of earning higher gains during the bull run. Additionally, when you buy across the entire market cycle (s), the total cost gets averaged out – which effectively means that you do not need to wait for the ‘right’ price to buy. The idea behind this is this: keep buying at the regular intervals and relax!
Stopping the SIPs
Besides, the market correction is seen as a good time to buy. “Instead of stopping the SIPs, investors should capitalise on the market correction and use this as an opportunity to buy more,” argues Deepak Aggarwal, a Delhi-based chartered accountant and financial advisor.
Meanwhile, Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services, believes that stopping SIPs at this time is a foolish thing to do.
“Today after 4 years of bull run, market is in correction mode. This is actually a good time to keep your SIP going and rather increase a bit if saving permit to gather more units. SIP works on the rupee cost averaging method. It means over a long period of time, your cost of purchase becomes average due to bear and bull market and your investments become less volatile in comparison to lumpsum investments. And for this SIP should be running in all types of market conditions be it bear, bull or sideways. Stopping SIP at this time is a foolish thing,” she says.
It is noteworthy to mention here that SIP contribution stood at an all-time high of ₹25,322.74 crore in Oct 2024 as against ₹24,508.73 crores in September.
A year ago, SIP contribution stood at ₹16,928 crore in Oct 2023, thus indicating an increase of 49.6 percent in one year between Oct 2023 to Oct 2024.
The number of SIP accounts stood at the highest ever at 10,12,34,212 in Oct 2024 as compared to 9,87,44,171 in Sept 2024, reveals the latest AMFI (Association of Mutual Funds in India) data.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
