Should You Continue or Stop Your SIP During a Market Crash?

Have the recent sharp declines in the stock market left you wondering whether you should pause, continue or even stop your SIPs or Systematic Investment Plans? While stock market crashes can naturally be disheartening for an investor, it is important to remember that long-term investing has historically tended to outperform panic-driven decisions. This blog will highlight four crucial facts that will help you make an informed decision amidst the recent market volatility.

“The stock market is a device to transfer money from the impatient to the patient.” -Warren Buffett

Fact 1 - Nifty 50 Earnings Growth is Among the Highest in a Decade

One of the biggest factors that reflect the performance of the stock market is how much money companies make or the earnings growth. Simply put, earnings growth is just the increase in a company’s profits over time. It’s usually measured as a percentage—how much a company’s net income has grown compared to the previous year. Let’s say a company earned ₹100 crores in profits last year and earns ₹120 crores this year, then its earnings growth will be 20%. A higher earnings growth means the company is doing well, which often leads to an increase in its stock prices.

In the coming years, India’s top 50 companies (Nifty 50) are expected to see strong earnings growth:
FY 23 - 16%
FY 24 - 23%
FY 26E - 12%

What Does This Mean for Investors?

1. Stock prices follow earnings growth – When companies make more profit, their share prices generally go up over time.
2. Stopping SIPs now could mean missing out on future gains – If companies are expected to grow, their stocks will likely be worth more in the future. Continuing your SIPs lets you accumulate units at lower prices before the market moves up.
3. Short-term volatility is NOT long-term loss – Even if markets fall temporarily, as long as earnings growth remains strong, stocks tend to recover and go higher in the long run.
    

Fact 2 - Stock Market Valuations are Among the Lowest in a Decade

Historically, lower valuations have often been a strong indicator of attractive long-term buying opportunities. When the market trades at a lower Price-to-Earnings (PE) ratio compared to historical averages, it suggests that stocks are undervalued, making it a potentially favorable time for investors to continue their investments.

When one looks at the Nifty 50’s PE ratio over the years, the following data was observed:

March 2025: 19.66
June 2022: 18.9
February 2016: 18.6
10-Year Median PE (benchmark): 23.5

Currently, Nifty’s PE ratio is significantly below its 10-year median benchmark of 23.5, indicating that the broader market is trading at a discount compared to historical averages.

What Does This Mean for Investors?

1. Stocks Are Trading at a Discount: When valuations are lower, investors get to buy more units of quality stocks at cheaper prices, averaging down their cost per unit.
2. Potential for Stronger Long-Term Gains: Historically, markets tend to revert to their mean over time. This means that investing during low-valuation periods can lead to better returns when the market recovers and valuations return to their average or higher.
3. SIP Benefits from Market Volatility: By continuing SIPs during periods of low valuations, investors take advantage of rupee-cost averaging, reducing the impact of short-term volatility and improving overall portfolio returns.
    

Fact 3 - The Banking & Financial Sector is Driving Market Growth

The Banking & Financial Services Industry (BFSI) has been a pillar of strength for the Indian stock market and remains the largest contributor to overall market profits. The sector’s consistent performance and expansion make it a critical component of any long-term investment strategy.

• 40% Share in Market Profits: The BFSI sector contributes nearly 40% of the total profit pool of the Indian stock market. This dominance highlights its fundamental role in driving overall market returns.
• 13% Expected Annual Growth: The BFSI sector is projected to grow at a robust 13% per annum, ensuring consistent expansion and long-term wealth creation.
• Strong Economic Linkage: Financial institutions serve as the backbone of economic growth, facilitating credit expansion, business investments, and consumer spending—key drivers of a booming economy.

What Does This Mean for SIP Investors?

1. Stability & Growth Potential: Given BFSI’s dominant market share and steady growth outlook, investors in this sector can potentially benefit from both stability and long-term capital appreciation.
2. Resilience During Market Volatility: Financial stocks tend to recover strongly post-market downturns due to their crucial role in economic cycles. Continuing SIPs ensures that investors accumulate quality BFSI stocks at attractive valuations during dips.
3. Compounding Wealth Over Time: With its consistent double-digit growth rate, BFSI investments through SIPs can potentially generate substantial wealth over time, making them a crucial part of a well-diversified portfolio.
    

Fact 4 - Time in the Market is More Important Than Timing the Market

Market volatility often tempts investors to pause their SIPs or try to time their entries and exits. But history has shown that staying invested is the best strategy for wealth creation.

Let’s understand this with the help of an example. Consider Ms A, a long-term investor who started investing in the Indian stock market in 2001 with ₹10,000. If Ms A stayed fully invested, her ₹10,000 investment in 2001 would have grown at an annual rate of 15.61%, turning into ₹3,25,004 by 2025.

But what if Ms A tried to time the market and missed just a few of the best-performing days? Let’s see how her returns were impacted:

By staying invested, Ms A’s wealth compounded significantly over time. If she had attempted to time the market and missed just a few key days, her long-term gains would have suffered massively. 

This is a clear testimony of how one should stay disciplined with their SIPs.

You can calculate the estimated returns on your SIP with the SIP Calculator.

Also explore: SIP in Stocks vs Mutual Funds - What's better for you?

What Does This Mean for Investors?

1. Timing the market is nearly impossible – No one can predict when the biggest market gains will happen. Often, the best days come right after big crashes.

2. Missing just 10 best days can cut your returns by more than half – If Ms. A had been out of the market for just 10 key days over 24 years, her final investment would have dropped by ₹1,83,000!

3. Long-term SIPs ensure you never miss out on market rebounds – Instead of worrying about short-term market movements, consistently investing through SIPs helps you capture the full growth potential of the market.

So, do remember that staying the course beats trying to time the market, always! 

Explore the top SIPs to invest in 2025 here. 
 

Final Verdict: Should You Continue Your SIP?

Stopping your SIP during a crash may seem like the safe choice, but history, data, and market fundamentals suggest otherwise. The smartest move seems to be to stay invested, continue SIPs, and focus on long-term wealth creation. Data clearly supports staying invested through SIPs, even during market downturns. Here’s why:

• Markets recover over time – Temporary crashes have historically been followed by strong rebounds.
• You accumulate more units at lower prices – Volatility works in favor of SIP investors through rupee cost averaging.
• Long-term growth potential remains strong – With robust earnings growth and attractive valuations, the Indian market offers significant upside.

So, stay disciplined and trust the process.
 

Disclaimer

This blog is for general/educational information purposes and is no way to be considered as advice, or recommendation for investment or otherwise.

Investment in securities market are subject to market risk, read all the documents carefully before investing. The securities quoted are exemplary and not to be considered as any kind of advice or recommendation. The numbers and returns shown are merely for illustrative purposes only. The past performance of the stocks are not necessarily indicative of future performance. Registration granted by SEBI, membership of a SEBI recognized supervisory body, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors INDmoney Private Limited 616, Level 6, Suncity Success Tower, Sector 65, Gurugram, 122005, Research Analyst Registration No. INH000018948.

Sources: Internal Calculation, PGIM, Screener, NSE Indices, Bloomberg - Consensus estimates, BNP Paribas, MS