Priyanka
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Mutual Fund Investment : The Indian stock market has seen a notable decline in 2025, raising concerns among investors, especially those invested in mid and small-cap mutual funds.
- Nifty 50 has dropped 2% so far this year.
- Nifty Midcap 150 has fallen 7%.
- Nifty Smallcap 250 has plunged 9%.
With these sharp corrections, many investors are now wondering whether they should continue or stop their Systematic Investment Plans (SIPs) in mid and small-cap funds.
Expert Opinion: Stay Patient and Think Long Term
Mid and small-cap funds come with higher risk and volatility, making them suitable for investors with a high-risk tolerance.
Key Expert Recommendations:
- Investors should have a long-term horizon of at least 7-8 years for these funds.
- The exposure to mid and small caps in the portfolio should not exceed 30-40%.
- Market corrections are normal, and exiting in panic can lead to missing potential recovery phases.
What Does History Suggest?
Market trends show that corrections in mid and small-cap stocks are temporary, and they tend to bounce back strongly.
- In 2008, mid and small caps crashed by 70%, but they recovered over 70% the following year.
- Over the last three years, this category has delivered absolute returns of up to 100%.
- A 20% decline today may seem concerning, but for long-term investors, it's not a major red flag.
The key takeaway? Patience and discipline in SIPs have historically paid off in the long run.
Investor Caution: Should You Start New SIPs?
For new investors, it's important to evaluate current market valuations before committing to mid and small-cap funds.
- If you already have 20-25% of your portfolio allocated to these funds and your investment horizon is 10+ years, you can continue your SIPs without worry.
- However, if you’re starting fresh, it may be wise to stagger your investments instead of investing a lump sum, given the high valuations.
Final Verdict : Stay Invested with a Strategy
The current market dip is not a reason to panic-sell or stop SIPs. Instead, investors should:
Stick to their long-term goals.
Maintain a diversified portfolio with the right allocation.
Continue SIPs if they are in it for the long haul (7+ years).
Avoid lump sum investments if valuations are high.
