Opinion | The Indian Investor Has A New Problem: An SIP That Does Nothing

One of the most disconcerting aspects of the stock market today for millions of Indian investors is the lack of a crash. The Nifty has been trading at high levels for the last three years, while earnings have slowly closed the gap. It can be especially weird for an investor who started investing during the post-pandemic boom. The money keeps going out of the bank account, but the wealth doesn't seem to be going anywhere.

That experience is worth more than the tried-and-true recommendation to just stick it out. There has been a larger shift in India's financial economy. The country has accumulated a vast stockpile of domestic capital at a time when valuations, corporate profits, and global capital flows are under pressure.

SIP assets in March this year were ₹15.11 lakh crore, about one-fifth of the mutual fund industry's assets.

The Price Of The Past

The equity risk premium is a way to grasp the underlying problem. Some valuations reached levels in 2023 where the premium investors demanded for taking on equity risk became unusually low. At current prices, investors were essentially willing to pay less for riskier stocks than for relatively safer government bonds. The correction that followed has, therefore, been unusual. Instead of a dramatic drop in prices, earnings have had to rise to justify valuations, which economists refer to as a "time correction."

A market can correct itself by lowering prices. It can also correct by letting earnings and nominal GDP grow while prices remain broadly unchanged. The latter has been seen in India, with nominal GDP growth still in the 8.6% to 8.9% range.

Valuation remains the main theme. For years, India's market has traded at a premium to many emerging-market peers, who have been willing to pay for better growth, institutionalisation, and the promise of higher corporate profits. But this premium cannot increase indefinitely. The more investors pay today, the more growth they are already paying for.

It is here that the Indian SIP revolution takes an unexpected macroeconomic twist.

The Liquidity Machine

SIPs were developed on a sound behavioural basis: invest regularly, don't try to time the market, and don't bunch purchases together at different prices. The underlying reasoning is correct. What has changed is the amount of money being transferred through the system.

In March 2026, SIP contributions reached Rs 32,000 crore per month, with 9.72 crore active SIP accounts. By July, monthly contributions stood at Rs 31,961 crore. SIP assets in March were Rs 15.11 lakh crore, about one-fifth of the mutual fund industry's assets.

The mutual fund industry has grown rapidly too, with assets reaching Rs 85.76 lakh crore in July 2026, almost six times their level a decade earlier.

India thus has something that it didn't have in previous market cycles.

That has been a key factor in market resilience. According to a recent Reuters report, foreign investors have sold about Rs 2.4 trillion worth of Indian stocks in 2026, with domestic investors serving as a significant counterweight.

Also Read | India's Rs 25 Trillion Mutual Fund Industry Faces A Challenge. What SIP Investors Must Know

This resilience has a darker side. The amount of domestic liquidity can affect the rate of valuation changes. Eventually, markets need to align the price that investors are willing to pay, the earnings that companies can make, and the return on alternative investments. Persistent inflows affect the first much more rapidly than the second.

To call SIPs a bubble, therefore, would miss the more interesting development. Financial savings have emerged as a stabilising force that can change how an expensive market corrects. The adjustment doesn't have to be a dramatic drop in prices; it can be a gradual process over several years with relatively low returns.

The Investor Problem

There's another irony in this. The investors who helped shape India's equity market with regular monthly investments are now entering a very different environment from the one in which the SIP culture started.

Many investors have been conditioned by the last 10 years to expect good equity returns. But high valuations are unforgiving. Corporate earnings could grow in high single digits or low double digits, while valuation multiples decline simultaneously. An investor may thus invest for several years without seeing similar growth in the value of their portfolio.

This is already reflected in the gap between financial-market participation and performance. Despite corrections in equity markets, equity assets grew to Rs 31.98 lakh crore in March 2026, up 8.6% from a year earlier.

The big question is not whether SIP investors should discontinue investing. If you have a long investment horizon, it is a logical strategy to invest regularly. The issue is whether the industry has done enough to educate a new generation of investors that disciplined investing cannot overcome what valuations will allow.

There's also a bigger economic question. Household financialisation is beneficial because it redirects savings into financial assets and enhances the supply of domestic capital. But savings are only economically productive when businesses can earn a profitable return on that investment. Rapid financialisation can hence occur without a corresponding increase in profitable investment opportunities. India is now faced with this dilemma.

India has established a large domestic equity culture where domestic liquidity can buffer foreign exits and make abrupt corrections less likely. This can make investing in an expensive market even more confusing. The index doesn't crash, the economy keeps growing, SIPs are made monthly, and returns remain modest for years.

The solution ultimately lies in earnings. Today's valuations can become less demanding if nominal GDP remains robust and corporate profits continue to grow. The same liquidity that kept the market from a sudden correction can prolong the adjustment if earnings fall short.

The three-year wait for investors is more than just a test of patience. It's a reminder of a fundamental truth of markets. Returns are not only a function of growth, but also of the price paid for it.

The SIP revolution in India has altered the ownership of the equity market and, more importantly, the way it absorbs shocks. The next step will show something equally significant: can household savings increase faster than investable corporate earnings for a long period, and what does the market look like as these forces slowly rebalance?

(Deepanshu Mohan is Dean and Professor of Economics, OP Jindal Global University, Visiting Professor at the London School of Economics (LSE), and Visiting Research Fellow at the University of Oxford. Ankur Singh studies Economics and is a Research Analyst with Jindal University's Centre for New Economics Studies)

Disclaimer: These are the personal opinions of the author