Stock Market Crash: Should Retail Investors Stop SIPs?

The recent steep falls in the stock market have made many investors wonder whether it makes sense to continue their Systematic Investment Plans (SIPs). Although market volatility can be disconcerting, a few critical factors indicate that continuing SIPs may be beneficial for long-term wealth accumulation.

Earnings Growth Outlook

The Nifty 50 index has seen a significant correction, down by 16% since September 2024 in dollar terms. Small-cap and mid-cap stocks have suffered even deeper losses, with falls of 23% and 21%, respectively.  Even in these declines, some sectors such as Banking, Financial Services, and Insurance (BFSI) have remained resilient. 

Financial services stocks in March 2025 recovered, playing a major role in the recovery of the Nifty 50 and laying the groundwork for a strong fiscal year 2026.

Market Valuations Over Time

Market valuations have readjusted after recent corrections. The forward price-to-earnings (P/E) multiple of the Nifty 50 is at 20x, down from the 10-month average of 20.6x, showing a shift towards fair valuation.  This readjustment indicates that stocks are getting more reasonably valued, possibly providing good entry points for investors.

BFSI Sector's Role

The BFSI industry has been one of the market drivers. Financials in the FY 2025 picked up almost 20% and outpaced the Nifty 50 rise of 5%. The sector's strong performance reaffirms its importance to the economy and its ability to support overall market stability.

The Need to Stay Invested

Seeking to time the market by holding back SIPs during slumps may result in lost opportunities. Market history teaches us that, in the long run, the market tends to bounce back to health, benefitting investors who stay the course. For example, in March 2025, financials spearheaded a rally in the Nifty 50, signaling the advantages of riding out tough times.

Although market declines are unsettling, they usually offer chances for disciplined investors. Sustaining SIPs during these times enables the purchase of units at cheaper rates, which can improve long-term returns. 

Making investment choices based on long-term financial objectives, instead of responding to short-term market fluctuations is significant. Seeking advice from a financial advisor can offer customized advice based on individual financial conditions.