Systematic Investment Plan Returns Lag Behind Category Averages Across Market-Caps, but Performance Gaps Easing Over Time

Systematic Investment Plans (SIPs) Underperform Category Averages

Key Findings:

• Large-cap SIP returns were -12.43% in one year, compared to a category average of 1.19%.
• Mid-cap fund SIP returns were -10.21% versus 5.15%, and small-cap fund SIP returns were -16.71% against -0.11%.
• Small-cap SIPs recorded the largest shortfall at 16.6 percent over one year, followed by mid-cap at 15.36% and large-cap at 13.62%.

Market Conditions:

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• Recent market conditions, including a 12% decline over the last one-and-a-half years, have contributed to the divergence in SIP returns.
• Small caps have been particularly affected, with a decline of around 18%, which has further dragged down returns compared to category averages.

Long-Term Performance:

• Over three and five years, mid- and small-cap SIPs continue to lag more than large-cap funds, reflecting higher volatility in these segments.
• However, by ten years, the trend flips, with mid-cap SIPs falling just 0.21% behind their category average, small-cap by 0.39%, and large-cap by 1.29%.

Market Volatility:

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• Market volatility over the past few quarters has been pronounced due to a mix of domestic and global factors, including elevated interest rates, inflationary pressures, and macroeconomic uncertainty.
• Fund managers have largely stayed disciplined despite volatility, deploying cash effectively and maintaining a long-term focus.

Investor Sentiment:

• Investor behavior remains resilient, with early March trends suggesting improving sentiment and a rotation back into equities.
• Some investors are using the correction as a buying opportunity, indicating a positive outlook for the market.