Reasons Behind Indian Investors’ Continued Commitment to SIPs Amidst Lackluster Market Returns
Weak stock market returns and foreign investor sell-offs have not deterred retail investors in India from continuing their monthly investments through Systematic Investment Plans (SIPs). A recent JP Morgan report indicates that despite a sluggish performance on Dalal Street over the past two financial years, domestic investor participation remains robust. The Nifty 50 index recorded a two-year compound annual growth rate (CAGR) of just 0.8% in rupee terms and a decline of 3.2% in US dollar terms. During FY25 and FY26, foreign portfolio investors (FPIs) divested approximately $36 billion (Rs 3.3 trillion) from Indian equities.
Monthly SIP inflows surged by 48% year-on-year, reaching Rs 310 billion in May 2026. Cumulative net inflows into equity and balanced funds stood at Rs 9.43 trillion (USD 109 billion), according to the report. This trend underscores the resilience of retail investors, who have maintained their investment strategies despite market volatility.
Drivers of SIP Investment
JP Morgan attributes the sustained inflows into SIPs to favorable tax policies and ongoing support from the government. The report suggests that these factors will continue to bolster capital market investments. SIPs have emerged as a primary source of demand for domestic equities, accounting for 77% of total equity and balanced net inflows in FY26. Monthly SIP flows reached Rs 310 billion in May 2026, reflecting a growing “set-and-forget” mentality among retail investors.
In addition to SIP inflows, JP Morgan noted a structural increase in trading activity across exchanges. The report highlighted significant growth in exchange volumes, driven by index options, weekly expiries, and heightened participation from retail and algorithmic traders. The average daily premium turnover rose dramatically from Rs 10 billion in FY14 to Rs 699 billion in FY26.
Stock Preferences and Market Outlook
JP Morgan’s stock selection is based on business-model quality, regulatory exposure, and valuation metrics. The brokerage favors companies such as Angel One, CAMS, ICICI AMC, NAM, and HDFC AMC. It anticipates that exchanges and depositories will benefit from enhanced pricing power and operating leverage. However, asset management companies (AMCs) may face challenges in operating leverage due to regulatory limits on total expense ratios (TERs).
While JP Morgan maintains a positive outlook on the sector, it has identified potential risks. These include the possibility of SIP inflows falling below Rs 250 billion for an extended period, adverse regulatory changes impacting derivatives trading, and increased market volatility. The report specifically notes, “Key risks include SIP inflows staying below Rs 250 billion; adverse regulatory changes resulting in 20% lower ADPTVs or cancellation of weekly expiries; and futures/premium turnover exceeding 15% above assumptions on a sharp rise in volatility.”
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