NEW DELHI: The Indian stock market has experienced significant declines recently. The BSE Sensex Index fell by 1.90% to 73,198.10 on Friday, February 28, 2025, marking a 6.32% decrease since the start of the year.
This downturn is attributed to concerns over a potential global trade war and a slowing U.S. economy.
In this volatile environment, many investors are questioning the effectiveness of their Systematic Investment Plans (SIPs). Users on social media platform X havereacted on the same concerns.
Investment advisor Sunil Jhaveri emphasized the benefits of SIPs during market corrections. He noted that when markets decline, SIP investors acquire more units at lower prices, enhancing long-term wealth accumulation. Jhaveri advised investors with long-term goals not to halt their SIPs during market downturns, as this strategy leverages the advantage of purchasing more units at reduced costs.
“When you are doing an SIP and your goals are 10, 15, or 20 years away, be happy if your initial SIPs are delivering negative returns,” he writes.
Another user highlighted a statement by Finance Minister Nirmala Sitharaman, who acknowledged the role of retail investors in stabilizing markets amid fluctuations caused by Foreign Institutional Investors (FIIs) and Foreign Portfolio Investors (FPIs). However, the user pointed out that over 900,000 SIPs were closed on a net basis in January alone, indicating a potential shift in investor sentiment.
FIIs and FPIs may come and go; retail investors take care of markets,โ Nirmala Sitharaman said. Meanwhile, over 9 lakh SIPs closed on a net basis in January alone,โ he tweets.
Investor Aditya Trivedi expressed concerns about India’s tax policies on investments. He suggested that the government should consider eliminating the Long-Term Capital Gains (LTCG) tax and reducing the Short-Term Capital Gains (STCG) tax to 10%, along with abolishing the Securities Transaction Tax (STT).
โThe government should seriously consider a 0% LTCG tax, a 10% STCG tax, and 0% STT,โ he writes.
Trivedi argued that such measures could encourage both foreign and domestic investments, as current tax structures may deter investors and contribute to declining SIP inflows.
Financial experts consistently recommend that investors maintain their SIPs during market downturns. Continuing SIPs allows investors to benefit from rupee cost averaging, where purchasing more units at lower prices during market lows can lead to substantial gains when markets recover. Pausing or stopping SIPs during volatile periods may result in missed opportunities to accumulate units at favorable prices, potentially hindering long-term investment goals.
