How SIPs Work in Falling vs Rising Markets

Introduction

Many investors fear red markets. But for SIP investors, red can be a blessing — if they stay the course.

SIPs, or Systematic Investment Plans, work on a fixed monthly investment habit. But how do they really perform when the markets rise or fall?

 Let’s decode how SIPs behave in different market cycles and why they’re a powerful ally in wealth creation.

What Happens to SIPs in a Falling Market?

When markets fall, your SIP buys more units for the same amount of money. This reduces your average cost per unit. 🎯 Key Benefit: You accumulate more units cheaply, setting you up for strong gains when markets recover.

  What About Rising Markets? 

 In a rising market, your SIP buys fewer units because NAVs are higher. However, the overall value of your investment grows rapidly because the units you already own are appreciating. 

 🟢 Key Benefit:

 Gains compound as the market moves upward. 

  Real-Life Example: Ananya's SIP Journey Ananya invests ₹10,000/month in an equity mutual fund from Jan 2022 to Jan 2025.

• In 2022, the market dipped 15%. Her SIP bought more units each month.
• In 2023, the market recovered and grew by 18%. Her earlier units gained significantly.
• By 2025, she had invested ₹3.6 lakhs and her portfolio value was ₹4.45 lakhs — a CAGR of 11.6%.

 SIPs work best through all market cycles. In falling markets, they load up on cheap units; in rising ones, they reward your patience.

Stay consistent with SIPs — no matter the market mood. Let volatility work in your favor. Summary Table: SIP Performance in Market Phases