Despite weak returns, SIP inflows remain strong. Are we underestimating risks around investor behaviour?
The past two years have been challenging, marked by a valuation shock in September 2024, Trump’s tariffs, concerns over India’s AI opportunity, and more recently, war and rising oil prices. Foreign investor outflows and a weakening rupee have added to the pressure. Yet, markets have remained resilient, with returns broadly flat over two years. Monthly SIP inflows of ₹30,000-32,000 crore have helped support the market, and this resilience could attract foreign investors once conditions stabilize. However, high SIP stoppages and cancellations point to investor churn, particularly among those who have been investing for less than two years. But investor persistence is becoming a concern. If new investors see the market fall 5-10%, panic and exit, they may never return. The industry has done a good job of simplifying access, though there is more to be done. The next challenge is to educate investors and help them stay invested, because compounding over time is what will ultimately help them build wealth.
