Systematic Investment Plans (SIPs) have emerged as one of the most consistent wealth-building instruments for Indian investors. SIPs instill discipline, eliminate emotional interference, and simplify investing via periodic investment every month. But during market crashes, investors are frequently confronted with a hard question: Should I stay the course with my SIP or press the pause button until the market comes back?
Actually, during each of the biggest slumps—from the 2008 global financial meltdown to the 2020 COVID-19 crash numerous investors panicked and halted their SIPs. But history and figures simply indicate that why stopping SIP is a bad idea rests in the very concept of SIP investing: averaging cost, compounding, and weathering volatility.
This blog is an investigation of the SIP stoppage debate vs continuing SIP, examines the SIP stoppage ratio, juxtaposes SIP stoppage against new SIP registrations, and offers a clear, data-driven guide for long-term investors.
Learning about SIP Investing in Volatile Markets
Before we deal with whether or not pausing SIP in market crash is prudent, let us get back to what SIP investing actually means.
A Systematic Investment Plan (SIP) is where you invest a fixed amount at regular intervals, typically monthly, in a mutual fund. SIPs utilize rupee cost averaging because they purchase more units in a down market than in an up market, thereby averaging the prices over time.
In market crashes, this mechanism actually benefits the investor. Though your portfolio will appear “red” in the short run, your SIP is buying more units at cheaper rates. In the long term, when markets bounce back, these cheap buys earn greater returns.
Why Stopping SIP is a Bad Idea
The initial reaction to a crash is to save capital by halting contributions. But here’s why stopping SIP is a bad idea:
Missing out on the Power of Averaging – Market falls are the most opportune time to buy more mutual fund units at a lower cost. Halting SIPs deprives you of this benefit.
Disrupting Compounding – SIP investing is most effective with consistent discipline. Even a 6–12 months gap can make a big difference in your corpus over the long term.
Emotional Decision-Making – Markets will always go through cycles. Halting SIPs when the market is falling is based on fear, not rationale.
Proven Historical Data – Investors who maintained SIPs up to 2008 and 2020 experienced better returns than those who discontinued.
For instance, an investor who invested ₹10,000 per month in Nifty 50 SIP since January 2008 (at the eve of the crash) and remained invested for 10 years would have built a much larger corpus than an investor who discontinued for 2008–09.
Pausing SIP During Market Crash: The Wrong Strategy
The argument “pausing SIP during market crash” also makes sense why invest when your portfolio is declining? But such a thought ignores how markets work:
Crashes are short-term, recovery is long-term.
By waiting, you also lose out on the opportunity to build more at lower NAVs.
At the time of market bounce back, you begin lagging behind, since your cost average is still higher.
Let’s take the COVID-19 crash example: Between February–March 2020, markets fell nearly 40%. Many investors paused SIPs, fearing deeper losses. However, those who continued saw their portfolios almost double within 18–24 months as markets rebounded sharply.
Lesson: Pausing SIPs is like skipping premium discounts during a sale—you lose the advantage when it matters most.
Stopping SIP vs Continuing SIP: Which Wins?
The actual debate is halting SIP vs ongoing SIP in volatile markets. Let’s analyze both sides.
Stopping SIP
- Short-term respite from loss phobia
- Rupee cost averaging opportunity lost
- Discipline loss and compounding
- Risk of investing late (after market already recovers)
Ongoing SIP
- Low-cost unit accumulation during the down cycles
- Compounding power utilized with consistency
- Financial discipline retained
- Better long-term returns as markets recover
Conclusion: History proves that ongoing SIP always trumps halting SIP in wealth creation.
SIP Stoppage Ratio: What the Data Says
The SIP stoppage ratio is the ratio of SIP accounts halted to total SIP accounts opened. An increase in stoppage ratio during crashes indicates panic among investors.
During FY 2020–21 (COVID crash year), SIP stoppage ratio rose to as high as almost 60% since lakhs of investors halted.
During FY 2022–23, when markets were calm, SIP stoppage ratio fell, indicating investors gained confidence.
This information clearly shows the behavioral bias—investors will halt SIPs when they should be doing so the most.
SIP Stoppage vs New SIP Registrations
A further fascinating trend is SIP stoppage vs new SIP registrations.
At the time of crashes, stoppages rise, but along with them, there are fresh registrations from veteran investors who notice opportunity.
For example, March 2020 witnessed increased new SIP accounts being opened by veteran investors while several first-timers left.
AMFI statistics reveal that long-term wealth creators are those who open new SIPs during bad times, not halt existing ones.
This differentiation indicates the disparity between opportunity and fear-based investors.
Behavioural Dimension of SIP Investing
Market crashes are the ultimate test of investor psyche. Retail investors majorly succumb to fear and halt SIPs during the wrong time. This is where guidance and financial literacy come into play.
Loss Aversion Bias – Irrational stoppage due to fear of viewing losses.
Recency Bias – Believing recent drops in the market will go on and on forever.
Herd Mentality – Imitation of others who are halting SIPs.
At VSRK Capital, we ensure that remaining invested is not only a strategy, it’s an attitude.
The Power of Staying Invested
Think of two investors in a crash:
Investor A halts SIPs during the downturn.
Investor B persists with SIPs.
Five years on, Investor B ends up with a bigger corpus, although short-term values declined more precipitously.
Moral of the story? Market crashes are blessings in disguise for systematic SIP investors.
How to Remain Disciplined During Crashes
Rather than stopping SIPs, this is what investors can do:
Trust the Process – Keep in mind that SIP is a long-term game.
Revisit Financial Goals – Think about why you began, not today’s volatility.
Avoid Frequent Tracking – Regular checking exaggerates fear.
Consult Experts – AMFI-registered distributors such as VSRK Capital can assist in making logical decisions.
SIP Investing and Market Cycles
Each crash in history—Harshad Mehta scam (1992), dot-com bubble (2000), global financial crisis (2008), demonetization (2016), COVID crash (2020)—was followed by a recovery.
Investors who persisted with SIP investing were rewarded with multibagger gains. This cycle confirms one fact: markets crash, but they always bounce higher than previously.
VSRK Capital’s Guidance
Being an AMFI Registered Mutual Fund Distributor, VSRK Capital recommends investors to:
Never discontinue SIPs on account of short-term market occurrences.
Rather than viewing declines as threats, consider them opportunities.
Think about wealth creation over the long term and not short-term volatility.
It is our responsibility as their advisor to help investors develop resilience, discipline and trust in SIP investing..
Conclusion
Markets have a cycle of booms to busts to booms. It’s how you react to the markets and the end result that is important. SIP investing is meant to ride out market fluctuations, and if investors continue to invest instead of hitting pausing, they will be in a greater financial position.
Stopping SIP vs continuing SIP? Always continue.
Pausing SIP during market crash? Don’t.
SIP stoppage ratio? Learn from it, don’t follow the crowd.
At VSRK Capital, we believe in one single golden rule: Stay disciplined, stay invested, and let time and markets work for you.
FAQs
Because you forgot the opportunity to buy at lower costs, lose the benefits of compounding, and tend to re-enter at elevated levels.
No, halting SIP during a crash is inadvisable. Crashes provide you with additional units at discounted rates, increasing long-term returns.
It reflects the proportion of investors who have halted SIPs. A large ratio during a crash suggests panic exits, typically resulting in regret later on.
Continuing SIP always wins long term. It ensures cost averaging, compounding, and wealth creation, while stopping hampers financial goals
