How Systematic Are SIPs?

The Why

Everyone calls systematic investment plans (SIPs) the steady money in Indian equities. This piece tests that. During market drawdowns, do investors keep their SIPs going, or do they cancel them out of fear of further losses?

It matters because SIPs are treated as “sticky money”: a structural cushion that keeps domestic institutional investor (DII) buying even when foreign portfolio flows turn negative. If that money keeps coming in a fall, it steadies the market. If retail investors pause or stop their SIPs when markets drop, the cushion is thinner than people think.

Pinch(es) of Salt

The test uses equity mutual fund AUM growth, which is not the same as SIP money, for 2 reasons.

First, AUM moves with both new money and prices. In a fall, the mark-to-market drop in what the funds already hold can slow AUM growth even if SIP money keeps coming in.

Second, AUM holds more than SIPs: lump sums, institutional money, switches between schemes, systematic transfer plans (STP), systematic withdrawal plans (SWP) and other investors, depending on how the AMFI data is built. And people do change behaviour in a fall: some redeem to limit losses, some pause SIPs, some move to debt funds, and income worries, job losses or shocks like COVID make households more careful still.