Should you continue with SIP Investment in the current scenario?

The Indian economy is witnessing COVID-19 led disruptions. In such times, it is understandably upsetting to see your mutual funds in red. Many investors during a down turn is usually caught in a dilemma of whether to continue with SIPs in the current scenario ridden with uncertainty.

However, while there is near-term disruption, some greenshoots are already visible as the economy begins to limp back to recovery. Let this event not play a spoilsport to your long-term goals and your financial plans.

Here are some strong reasons why you should continue with your SIP:

You get more units: A market downturn is an excellent buying opportunity. Your SIP investments buy you more number of units than when the market was trading higher, and your overall cost of acquiring mutual fund units is going down. This, therefore is a great time to continue investing. This way, you even stand to gain more from a recovery.

What you see is notional loss: The loss you see on your SIP investment is a notional loss and by redeeming now, you are converting it into a real loss. You may also lose the opportunity to gain from a recovery. Hence, it is advisable to stay calm and not sell off your holdings hastily.

Nothing lasts forever: Not even a market downfall! If you look back at history, every big crisis has been followed by a period of growth. To illustrate this, the subprime crisis of 2018, led to an over 60% fall for the market from its peak then. This was followed by a robust 21% compounded annualised growth over the next 5 years.*

And most importantly…

India’s growth story remains intact: India’s demographic advantage translates into a considerable consumption story. With nearly 60% of India’s economy driven by consumption, the Indian market is enormous and presents investors with plenty of opportunities. 

Historically, the Indian economy has adjusted to global challenges, such as stepping up exports of essential pharma products during the pandemic. Further, structural reforms such as tax incentives to corporates, growing financial inclusion, and formalisation of the economy and investor awareness campaigns will only help the industry grow in the coming years.

While this is a temporary phase in India’s growth story, the future outlook continues to be optimistic. The economic growth rate is expected to recover to 6.6% in FY22, according to Moody’s Investor Services. Sooner or later, equity markets reflect economic recovery.

Remember, markets tend to reward those who are patient and stay focused on their long-term goals. Treat this as yet another short-term blip in a long-term investing journey. Make this event something to learn or even profit from.

Download the Axis SIP app to strengthen and optimize your investment strategy in the current market scenario.

Be calm, be safe, and keep that SIP going!

Disclaimer: This article represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s). Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.

This is an investor education and awareness initiative by Axis Mutual Fund. Investors have to complete one-time KYC process. Visit www.axismf.com or contact us on customerservice@axismf.com for more information. Investors should deal only with Registered MFs, details of which are available on www.sebi.gov.in - Intermediaries/Market Infrastructure Institutions section.

Past performance may or may not be sustained in the future.

* Source: BSE India, Axis MF Research. Past performance may or may not be sustained in the future. Returns are indicative.

www.bseindia.com

Moody’s Investor services for economic growth

Consumption figures https://en.wikipedia.org/wiki/List_of_largest_consumer_markets