SIP Performance During 2008, 2020 & 2022 Crashes clearly shows how Indian equity markets react during extreme stress and how disciplined investors respond. During the 2008 Global Financial Crisis, the Nifty 50 fell by nearly 50–60% from its peak. In the 2020 COVID-19 crash, markets declined sharply by around 38% within weeks. The 2022 correction was milder but still painful, with the Nifty correcting by about 16–18% due to global inflation and aggressive rate hikes.
These crashes tested not just portfolios, but investor behaviour and this is where SIPs reveal their true strength.
Reasons Behind the Market Falls
- 2008 Global Financial Crisis: Triggered by the US subprime mortgage collapse and Lehman Brothers’ bankruptcy, leading to a global liquidity freeze.
- 2020 COVID Crash: Sudden halt of economic activity due to global lockdowns caused an unprecedented “flash crash.”
- 2022 Correction: Driven by geopolitical tensions, high inflation, and aggressive interest rate hikes by global central banks.
Each event differed in cause, but all shared one outcome, eventual recovery.
What Happens to the Already Invested Amount During a Crash?
When markets crash, the value of your existing investments falls sharply. A portfolio worth ₹10 lakh during a 50% drawdown may temporarily show a value of ₹5 lakh. This loss, however, is notional, you still hold the same number of units. The loss becomes permanent only if an investor exits during panic. SIP investors who remain invested allow time and recovery to work in their favour.
How Do Stocks Behave During Market Crashes?
During severe crashes, stock behaviour becomes highly correlated, meaning most stocks fall together regardless of quality. High-beta stocks, especially mid and small caps, often decline 1.5–2× more than benchmark indices. Defensive sectors like FMCG and Pharma fall less but are not immune. Volatility spikes sharply, reflected in surging India VIX levels, making daily price movements unpredictable and emotionally draining for investors.
How Do Investors Typically Behave?
Market crashes expose investor psychology. Fear dominates decision-making, leading to panic selling and widespread SIP stoppages. Many retail investors stop SIPs to “wait it out,” while experienced investors and institutions often increase exposure to quality assets at lower valuations. This behavioural gap plays a critical role in long-term outcomes.
SIP Investment Trends: Withdrawals vs Inflows
One of the most telling indicators during crashes is the SIP stoppage ratio—the number of SIPs discontinued relative to new registrations.
- During the 2020 COVID crash, the SIP stoppage ratio spiked to nearly 60%, indicating widespread panic.
- In recent volatile phases (2024–25), stoppage ratios have touched 75–76%, even as new SIP registrations continued.
Despite high stoppages, overall SIP inflows kept rising. Monthly SIP contributions crossed ₹29,000 crore by late 2025, highlighting a “revolving door” effect, many investors exit during fear, while new investors enter later at higher valuations. This paradox often hurts long-term returns.
SIP Performance & Recovery Timelines
SIPs historically rewarded patience, even when initial returns looked discouraging.
| Market Crash | Nifty Fall | Initial SIP Impact | Recovery Timeline | Long-Term Outcome |
|---|---|---|---|---|
| 2008 GFC | 50–60% | SIPs down ~30% by 2009 | 12–18 months | 10–12% XIRR over 5 years |
| 2020 COVID | ~38% | Sharp short-term losses | <12 months | Strong gains post recovery |
| 2022 Correction | 16–18% | Temporary volatility | Ongoing normalization | Positive for long-term SIPs |
Investors who started SIPs during or before crashes and stayed invested for five years or more consistently achieved positive outcomes.
Why SIPs Work During Market Crashes
The core advantage of SIPs lies in rupee cost averaging. When markets fall, the same SIP amount buys more units, reducing the average purchase cost. As markets recover, this larger unit base amplifies gains. Crashes, therefore, improve long-term SIP efficiency, provided discipline is maintained.
Long-Term Impact of Crashes on SIP Investors
Every major crash in Indian market history has been followed by new all-time highs. Investors who exited during 2008 or 2020 missed massive rallies that followed. SIP investors who stayed invested during declines significantly lowered their average cost, benefiting disproportionately during recoveries.
Conclusion
SIP Performance During 2008, 2020 & 2022 Crashes reinforces a critical investing truth: volatility is unavoidable, but disciplined SIP investing converts uncertainty into opportunity. While short-term losses test patience, a long-term horizon of five to seven years has historically rewarded investors who stayed the course.
