Step-Up SIP: Why Does It Make Sense In Current Volatile Market Conditions?

The Indian equity market has been rather volatile of late due to looming geopolitical tensions - relations between Iran-US are almost on the brink of direct conflict, Trump 2.0 intention to acquire Greenland (which the Greenland's leaders, and eight NATO members have opposed), the US's increasing intervention in other countries affairs, practicing projectionist policies, announcing higher tariffs, and so on.

All this is also having ramifications on the global economy and shaping a new world order amidst a multipolar environment. Market sentiments have turned nervous, and investors, as a result, seem wary. This is also the case with mutual fund investors. The net inflows into equity mutual funds dropped 6% (to Rs 28,054 crore), according to the data released by AMFI in December 2025.

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Although SIP (Systematic Investment Plan) contributions reached an all-time high of Rs 31,002 crore in December 2025. Notably, the SIP stoppage ratio rose to 85%. The total number of SIPs discontinued or whose tenure was completed was 51.57 lakh, versus 60.46 lakh for the new SIPs registered.

This ratio tells us that for every 100 new SIPs registered, 85 SIPs were stopped/discontinued or their tenure ended. Now, while the data for the proportion of SIPs stopped/discontinued voluntarily by investors versus those whose tenure ended/expired is not disclosed by AMFI, usually, the investors who panic and opt to stop or discontinue SIPs are higher in numbers.

In a volatile or falling market, stopping or discontinuing SIP is a costly mistake investors make. It applies brakes on the process of compounding and derails accomplishing the envisioned financial goals. You see, during the global financial crisis of 2008-09 or the COVID-19 pandemic, those who stopped their SIPs when the markets were sinking have lost out on the gains the Indian equity market made in the ensuing years.

In uncertain and challenging times when you are facing economic hardships, such as job loss, business downturn, medical emergency, etc., pausing' SIPs is understandable as against 'discontinuing/stopping' SIPs. In volatile market conditions or the corrective phase of the market, SIPs work the best. You accumulate more units at a lower NAV (due to the inherent rupee-cost averaging feature), and when the market begins to ascend again, it potentially compounds wealth.

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Hence, amid the volatility, don't try to time the market. SIPs, due to their inherent rupee-cost averaging feature, make timing irrelevant. When you SIP in mutual funds, practising financial discipline and focusing on time in the market is important rather than pressing the panic button.

If you stop/discontinue SIP, it impedes the process of compounding. Say, when you stop Rs 10,000 monthly SIP in an equity fund at 5 years, which was actually planned for at 10 years to achieve an envisioned financial goal, assuming a 12% CAGR, you end up building a corpus of around Rs 8.25 lakh at the end of 5 years, vis-a-vis Rs 23.23 lakh at the end of 10 years. So, there is an opportunity cost when you stop SIPs.

The point is, you can build a bigger corpus when you keep SIP-ping into mutual funds for a longer tenure, as each extra SIP year potentially supports compounding. This compounding gets even more pronounced when you step up SIPs.

The Power of Stepping-Up SIPs

A step-up SIP, also known as a top-up SIP, is a facility that allows you to automatically increase your SIP contribution after a certain period. You have the option to increase your SIP amount by a certain percentage (5-10%) or a fixed amount. Moreover, you can also select the interval as to when you wish to increase the SIP amount, for example, six months or one year.

It is in your interest to systematically raise your SIP contributions annually when you receive salary increments or do well professionally. Besides, it makes sense to consider stepping up SIPs now when the markets are volatile, as this shall enable you to buy more units in some of the best mutual fund schemes.

Say, you have an ongoing monthly SIP of Rs 10,000 for 10 years, and returns are 12% CAGR. Here's how much difference it would make if you step up your SIP by 5%, 10%, or 15% every year.
 

The table here explains that even an annual 5% step up in your monthly SIP of Rs 10,000 can make a 20% difference in the corpus build. And if the step-up rate is higher, say 10-15%, the corpus built can be even higher. Step up SIPs also potentially counter inflation. The corpus, which seems sustainable today, is taken care of with the step-up increase rate and potentially a bigger corpus.

As a result, the step-up SIP also reinforces your ability to achieve your financial goals sooner and efficiently. If the equity mutual fund schemes in your portfolio are clocking a decent compounded annualised return, it is worthwhile stepping up SIPs in existing schemes, as opposed to starting new SIPs in new ones.

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This adds to focus when you are financial planning and makes it easy to manage and monitor the progress of your portfolio, as opposed to complicating with too many funds in the portfolio. You see, all you need is a maximum of 8-10 best-performing schemes in your portfolio, irrespective of whether you are taking the SIP route or making staggered lump sum investments.

Whichever mutual fund scheme you are investing in, make sure they are not just among the best performing ones but also that align with your personal risk profile, broader investment objective, the financial goal/s you are addressing and the time to achieve those goals.

Keep in mind, India is the fastest-growing economy currently, considered to be a bright spot with a favourable demographic advantage. With reforms and several companies participating in India's growth story, over the long-term you could expect respectable returns from your mutual fund investments.

All you need to invest in market-linked investment avenues, such as equity mutual funds, is persistence, patience, prudence and strategy. Volatility is the very nature of the market, and how you approach or handle it with the correct temperament shall decide your investment success.

Invest sensibly. Happy investing!

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