Investors shift to SIPs as lump-sum investments lose preference amid market volatility

Investors are increasingly shifting away from one-time lump-sum investments and instead opting for systematic investment plans (SIPs), reflecting a rising preference for disciplined, long-term wealth creation in equities at a time when markets are facing geopolitical and trade tensions. This change suggests that retail investors are becoming more conscious of market volatility and are choosing structured investment approaches that help smooth market cycles while building wealth steadily over time.

As more retail investors route their savings through SIPs, their contribution to equity-oriented mutual fund inflows has increased significantly. In 2025, SIP investments accounted for about 35 per cent of net inflows into equity-focused mutual funds, amounting to more than Rs 3 lakh crore. This marks a notable rise from 2024, when SIPs made up around 25.36 per cent of net inflows, or roughly Rs 2.68 lakh crore, according to data released by the Association of Mutual Funds in India (AMFI). The steady increase highlights a structural shift in investor preferences rather than a temporary trend.

Monthly SIP inflows have also shown strong momentum. Investments through SIPs stood at Rs 31,002 crore in December 2025, registering a growth of over 17 per cent compared with the same month last year.  SIPs are appealing as they encourage regular saving and reduce the need for market timing. By investing fixed amounts at regular intervals, investors benefit from rupee cost averaging and the power of compounding over longer periods. This approach has helped bring a new segment of first-time investors into the mutual fund fold, further deepening retail participation in capital markets.

On the other hand, lump-sum mutual fund investments are less preferred now because heightened market volatility and uncertain valuations have made investors wary of timing the market correctly. Investing a large amount at one point exposes investors to short-term market swings, which can significantly impact returns if markets correct soon after investment.

A back-of-the-envelope calculation shows lump-sum investments had fallen around 27 per cent year-on-year in 2025 to Rs 5.6 lakh crore till November. While their share was still larger than that of SIPs, it declined to 65 per cent in 2025 from around 74 per cent in the previous calendar year.

Most people in the country do not have adequate money to make a lump-sum investment, and thus take a long-term approach. “…to make something (money), you need to be at least in the game (and keep investing), or you might miss out on an opportunity. I think people have learnt and become disciplined,” said A. Balasubramanium, managing director and CEO of Aditya Birla Sun Life Mutual Fund.

A bull market only comes once a while (where lump-sum investments give high returns), and in the current uncertain market and geopolitical conditions, SIPs provide the safest way for long term wealth generation, he added. Such investments also protect against currency-related risks through rupee cost averaging — a strategy that allows one to buy more mutual fund units when prices are low and fewer units when prices are high — lowering the average cost per unit over time and reducing the risk of potential losses in volatile markets.

“AMFI explicitly publishes SIP collections, but it does not separately tag the rest of purchases as ‘lump-sum’ in a headline breakup,” said Dhirendra Kumar, founder and CEO of Value Research. Also, gross inflows into mutual funds consist of large sums of money from institutions parked in debt avenues such as debt and overnight funds, which is why equity-focused funds are a better barometer for SIPs, he added.

With equity mutual fund schemes seeing the highest inflows (54 per cent of total net inflow in November), uncertain and volatile markets are another reason for the shifting trend towards SIPs. The benchmark Nifty 50 index has hovered around the 25,800-26,300 points range since late October, having rallied 9 per cent prior to that in the calendar year. The Sensex has been moving in the 84,000-85,500 range for some time now.

The delay in the India-US trade deal, rupee’s weakness against the dollar, and an uncertainty over a pickup in corporate earnings growth — expected from the second half of FY26 — are key reasons for the prevailing wariness in the market.

Thus, while long-term sentiment remains bullish for Indian equities — backed by positive macroeconomic conditions such as low inflation and strong GDP growth, improving earnings, and supportive policy measures including a low RBI policy rate — the short-term outlook remains uncertain. As a result, investors are likely spreading risk by investing through SIPs, market participants said.

Another factor behind the shift in investment behaviour is sluggish wage growth in the country, which has dampened the impact of positive policy measures such as cuts in goods and services tax (GST) rates across several sectors and an increase in the income tax exemption slab, both implemented last year.

Salaries in corporate India are expected to rise by 9 per cent in 2026, largely flat compared with the 8.9 per cent growth in 2025, according to global consulting firm Aon’s Annual Salary Increase and Turnover Survey 2025-26. The increase appears even more modest when adjusted for inflation, which offers a more accurate measure of real wage growth. “In such a situation, where savings are constrained due to stagnant salaries, it is far more convenient for investors to start SIPs than to deploy a large chunk of capital at once,” an analyst tracking the sector said.

The rising dominance of SIPs has emerged as a key growth engine for the mutual fund industry, which has continued to expand at a robust pace. Average assets under management across the industry recorded nearly 20 per cent year-on-year growth, crossing Rs 81 lakh crore as of November. This expansion has been largely led by consistent retail participation, with SIPs providing a stable and predictable flow of investments even during periods of market uncertainty.