Can your mutual fund SIP beat market volatility? Data on 100 schemes has the answer

Feroze Azeez, Joint CEO of Anand Rathi Wealth, in a conversation with Zee Business Managing Editor and market expert Anil Singhvi, shared an analysis of 100 of the largest mutual fund schemes.

Investors worried about their systematic investment plan (SIP) returns amid market volatility may find some reassurance in a study of 100 mutual fund schemes by Feroze Azeez, Joint CEO of Anand Rathi Wealth. The analysis examined SIP returns across different investment periods and market entry points to assess how regular equity mutual fund investments performed through market fluctuations.

In a conversation with Zee Business Managing Editor and market expert Anil Singhvi, Azeez explained why he undertook the study and shared findings from an analysis covering a substantial portion of the active mutual fund industry's assets under management (AUM). He said the schemes were selected by size rather than past performance to avoid drawing conclusions from a limited or selectively chosen sample.

The findings offer a historical perspective on SIP returns at a time when investors have been questioning the strategy amid market weakness.

SIP returns: What did the study of 100 mutual fund schemes find?

Azeez initially analysed the 25 largest mutual fund schemes by AUM. Together, these schemes accounted for approximately Rs 14 lakh crore, or around 38 per cent of the Rs 37 lakh crore active mutual fund industry, the expert said.

He subsequently expanded the analysis to 100 of the largest schemes, covering approximately Rs 24 lakh crore of assets and nearly two-thirds of the active mutual fund industry's AUM.

According to Azeez, the results from the initial 25-scheme sample showed that SIP returns varied considerably depending on the investment horizon.

The study reported the following annualised SIP returns across the 25 schemes:

* Three-year SIP return: 4.23 per cent

* Five-year SIP return: 11 per cent

* 10-year SIP return: 15.3 per cent

These figures relate to the initial 25-scheme analysis, not the expanded sample of 100 schemes. They show how the investment period can influence the returns investors earn through regular contributions.

SIP returns from January 2020: What did the 100-scheme analysis show?

One of the key findings discussed by Azeez concerned investors who started SIPs in January 2020, shortly before the Covid-19 market crash.

Azeez examined an SIP of Rs 1,000 per month started in January 2020. Over the 81-month period cited, the investor would have contributed Rs 81,000. The analysis reported different outcomes across the 25-scheme and 100-scheme samples, including an approximately 14 per cent annualised return for the expanded 100-scheme analysis.

He said an investor contributing Rs 1,000 per month from January 2020 would have invested approximately Rs 81,000 over the period examined. The study found that the investment's value and annualised returns varied across mutual fund schemes.

For the expanded sample of 100 schemes, Azeez cited an annualised SIP return of approximately 14 per cent. He also said the best-performing scheme had an investment value of around Rs 1.90 lakh against the invested amount of Rs 81,000.

Importantly, even the weakest-performing scheme in this January 2020 example delivered approximately 7 per cent annualised returns, according to Azeez.

The analysis was intended to demonstrate that the findings were not driven solely by a handful of top-performing funds. However, these results apply to the specific investment period and schemes examined; they do not guarantee similar returns for other investment periods or funds.

What happened when investors started SIPs at different market levels?

Azeez also examined SIP investments started at different points in the market cycle, including before and after the Covid-19 pandemic.

According to the explanation, an investor who started an SIP in January 2020 earned an annualised return of around 15 per cent in the example cited for the 25-scheme analysis. The study also reported a return of 12.31 per cent for an SIP started during the second Covid wave in 2021.

For investments started around June 2021, when markets had begun recovering, the annualised return was approximately 14 per cent.

These figures refer to different investment start dates and should be understood as historical results for the periods examined. Azeez used them to illustrate how investors who began investing at different stages of the market cycle experienced different, but positive, annualised returns in these examples.

Why did the expert expand the study from 25 to 100 schemes?

Azeez said he wanted to test whether the findings would hold across a broader sample rather than relying on a small selection of funds.

The initial 25 schemes covered approximately Rs 14 lakh crore in AUM. By expanding the sample to 100 schemes, he covered approximately Rs 24 lakh crore of the Rs 37 lakh crore active mutual fund industry, the expert said.

He also addressed a criticism that selecting the largest schemes based on their current size could introduce a bias, since the largest funds today may not have been the largest at the beginning of the investment period.

According to Azeez, when he considered the largest schemes by AUM at the time of investment, the results remained encouraging. He cited annualised returns of approximately 12.94 per cent for the 25 largest schemes and 13.76 per cent for the 100 largest schemes under this alternative approach.

The exercise was intended to check whether the findings depended on selecting schemes that had become large over time.

SIP vs RD: How did the returns compare?

Azeez also compared SIP investments with recurring deposits (RDs), arguing that the two are more comparable because investors contribute money at regular intervals.

During the explanation, he cited an example in which an SIP investment of Rs 81,000 generated a gain of approximately Rs 57,000, while the corresponding RD investment generated a gain of around Rs 18,000.

On this basis, he said the gain from the SIP was roughly 3.1 times the gain from the RD in the example.

The comparison was intended to highlight the potential reward for investors willing to accept equity-market risk. Unlike RDs, however, equity mutual funds do not offer assured returns, and their values can fluctuate with market conditions. The comparison also relates to the specific period and assumptions used in the study.

Why are SIP investors concerned about the current market?

During the conversation, Singhvi raised concerns about investors who started SIPs around September 2024, when benchmark indices were near record levels. He asked how investors who entered the market around that period might be faring after the subsequent fluctuations.

Azeez acknowledged that the market had experienced considerable volatility. The discussion noted that the Nifty had moved around the 26,300 level on multiple occasions before declining approximately 8 per cent from the levels cited in the conversation.

Azeez argued that investors making regular contributions could experience market volatility differently from those who invested a lump sum at a single market level. With an SIP, investors purchase mutual fund units at different prices. When prices fall, the same contribution buys more units; when prices rise, it buys fewer.

However, the ultimate outcome depends on the fund's performance, contribution dates and amounts, and investment horizon. The discussion highlighted the importance of examining SIP data across different investment periods rather than drawing conclusions from recent market movements alone.

Should investors stop their SIPs when markets fall?

The findings presented by Azeez suggest that the performance of an SIP should be assessed in the context of its investment period and the schemes selected, rather than solely on the basis of short-term market weakness.

The study found that the 25-scheme sample delivered annualised SIP returns of 4.23 per cent over three years, 11 per cent over five years and 15.3 per cent over 10 years.

Separately, the expanded 100-scheme analysis showed approximately 14 per cent annualised returns for the January 2020 SIP example, with the weakest-performing scheme in that example delivering around 7 per cent.

These are historical findings, not a guarantee that every SIP investor is currently in profit. Individual returns depend on the fund selected, contribution dates and amounts, investment duration and market conditions.

Investors should assess their own portfolios in line with their financial goals and risk tolerance before making changes to their investments.

The central takeaway from Azeez's study is that judging SIPs solely by recent market performance can provide an incomplete picture.

His analysis of 100 large mutual fund schemes found positive annualised returns in the January 2020 example, including for the weakest-performing scheme, while also showing that returns differed across investment horizons and market entry points.