Rising geopolitical tensions in West Asia involving the United States and Iran have increased volatility in global markets and raised concerns among investors. The uncertainty has led many mutual fund investors in India to question whether they should continue their systematic investment plans (SIPs) or pause investments until markets stabilise.
Market experts, however, say investors should avoid reacting impulsively to short-term volatility and instead focus on long-term investment discipline.
Geopolitical tensions trigger investor anxiety
Escalating tensions in West Asia have unsettled financial markets globally. The conflict has led to sharp swings in equity markets and increased risk aversion among investors.
As markets decline, retail investors often begin to worry about further losses and start considering whether they should withdraw their investments or stop SIP contributions temporarily.
However, experts say such periods of volatility are not unusual, and markets have historically recovered after geopolitical and economic disruptions.
Expert advises against stopping SIPs
D P Singh, Deputy Managing Director and Joint CEO of SBI Mutual Fund, said investors should avoid stopping SIPs or redeeming investments during market declines.
Speaking with market expert Anil Singhvi, Singh said investor concerns are understandable when markets fall continuously.
“Investor anxiety is natural when markets fall every day, and people worry that their notional profits may disappear. However, stopping SIPs or withdrawing money at such levels can convert notional losses into permanent losses,” Singh said.
Market cycles show recoveries can be sharp
According to Singh, financial markets have gone through several difficult phases in the past, including the Global Financial Crisis and the economic disruption caused by the COVID-19 pandemic.
He noted that after major declines, recoveries in markets are often sharp and sudden.
“History shows that after such corrections, markets tend to recover strongly. Investors who exit during declines often find it difficult to decide the right time to re-enter,” he said.
Avoid turning notional losses into permanent losses
Singh advised investors to stay invested unless they have an urgent need for funds. “Unless an investor needs money immediately or in the near future, it is better not to disturb the investment. These global challenges will not last forever, and markets eventually recover,” he said.
According to him, exiting investments after a sharp correction can lock in losses permanently.
Equity mutual funds see strong inflows
Despite market volatility, equity mutual funds continued to attract strong inflows in February. Data released by the Association of Mutual Funds in India (AMFI) showed that equity mutual funds received net inflows of Rs 25,978 crore during the month.
The inflows marked an 8 per cent increase from the Rs 24,028 crore recorded in January. The inflows came amid improving investor sentiment following the India–US trade agreement and continued participation from domestic investors.
Mutual fund industry AUM rises
Strong inflows also pushed the mutual fund industry’s assets under management higher. Total assets under management (AUM) of the industry rose to Rs 82 lakh crore in February from Rs 81 lakh crore in January.
The growth reflects continued investor participation across equity, debt and exchange-traded fund categories despite market volatility.
Flexi-cap, mid-cap and small-cap funds attract investors
Within equity schemes, flexi-cap funds recorded the highest inflows in February. Flexi-cap funds attracted net inflows of Rs 6,924.65 crore during the month.
Mid-cap funds followed with inflows of Rs 4,003 crore, while small-cap funds received Rs 3,881 crore. Sectoral and thematic funds also saw inflows of Rs 2,987 crore, while large-cap funds recorded net additions of Rs 2,112 crore.
However, equity-linked savings schemes (ELSS) witnessed net outflows of Rs 650 crore, indicating some profit booking or reduced tax-saving investments during the period.
Overall industry inflows moderate in February
Overall, the mutual fund industry recorded net inflows of Rs 94,530 crore in February. This was lower than the Rs 1.56 lakh crore recorded in January, reflecting moderation in flows across several categories.
The decline was mainly due to lower inflows in gold ETFs and debt funds compared with the previous month.
Gold ETF inflows fall sharply
Gold exchange-traded funds saw inflows of Rs 5,255 crore in February. This was significantly lower than the Rs 24,040 crore recorded in January and Rs 11,647 crore in December. Experts said the moderation in inflows may be due to profit booking after strong gains in gold prices and shifting investor interest toward equities.
Debt mutual funds also see lower inflows
Debt mutual funds recorded net inflows of Rs 42,106 crore in February. This was lower than the Rs 74,827 crore recorded in January. The moderation in inflows reflects changing investor allocation patterns amid evolving market conditions.
Experts say investors may continue shifting allocations between asset classes depending on market trends, risk appetite and macroeconomic developments.
Long-term investors advised to remain disciplined
Market experts emphasise that geopolitical tensions and short-term volatility should not disrupt long-term investment strategies. According to Singh, investors who remain patient and stay invested through market cycles are more likely to benefit when markets recover.
“Investors who can tolerate short-term volatility and stay invested are likely to benefit in the long run,” Singh said.
He added that India’s long-term growth story remains intact and periodic market corrections often create opportunities for disciplined investors.
