Indian equity markets have been turbulent in 2025 due to global risks such as high US treasury yields, tariff wars, and slowing earnings growth. The Nifty 50 even touched a low of 21,750 in April before rebounding. Yet, with India’s long-term growth story intact, these dips could be golden opportunities for wealth creation—especially for investors using Systematic Investment Plans (SIPs).
Historical data shows SIPs outperform lump-sum investments in volatile markets. For instance, from December 2007 to 2013, a lump sum in a Nifty 50 fund earned just 0.4% annualised, while monthly SIPs returned 8.45%—beating even post-tax fixed deposit returns. The key advantage was buying more units during market lows, boosting returns during recovery.
But investors can do even better by using smart SIPs in factor index funds, such as low-volatility or momentum strategies. In the same 2007–2013 period, a Nifty 100 Low Volatility 30 Index SIP returned 13.33% annually, while a momentum factor SIP gave 13.23%. Notably, even though momentum is typically a bull-market strategy, SIP purchases during deep bear-market bottoms significantly amplified gains.
For example, investments made in November 2008 yielded 167% over five years for momentum SIPs, compared to 128% for the Nifty 50. Even during the 2013–2019 bull run, low-volatility SIPs returned 107% and momentum SIPs soared 191%, far exceeding the Nifty’s 93%.
Recent data from 2021–2023 tells the same story. While a Nifty 50 lump sum returned 7.9%, a Nifty 50 SIP earned 11.5%, and a factor fund SIP delivered 12.5–13%. The ability to buy more during dips proved critical, as sharp drawdowns in momentum funds later powered strong rebounds.
With the probability of multiple market corrections over the next year, factor-based SIPs—also called smart beta products—offer investors a way to harness volatility for higher long-term returns. They combine the discipline of SIP investing with strategies designed to outperform during both bear and bull phases.
For long-term wealth builders, smart SIPs can turn short-term market pain into lasting financial gain.
