Should You Stop SIP During Market Crash? (India Guide)

You know that feeling when you open your investment app in the morning and everything is red? Your heart sinks. The numbers are down. Again. You refresh the page hoping it was a glitch, but nope—still red. Your carefully saved money seems to be disappearing right before your eyes.

If you've been feeling this way lately, you're not alone. But here's what most people don't realize: It's not the market crash that's the problem—it's that many investors are in the wrong investments for their situation.

Let me explain.

The Real Reason You're Panicking (And It's Not What You Think)

Meet Priya. She's 28, and has been saving diligently for her house down payment. She needs the money in 18 months. Her friend told her about a small-cap mutual fund that gave "amazing returns last year," so she put her entire down payment savings there.

Fast forward to today. The market has corrected, and Priya's portfolio is down 15%. She checks it every morning, feels sick, can't focus at work. She's thinking about selling everything to "stop the bleeding."

But here's the thing—Priya's problem isn't the market crash. Her problem is simple: she put money she needs in 18 months into an investment designed for people who can wait 7-10 years.

Small-cap funds are volatile by nature. They're meant for long-term investors who can ride out the ups and downs. For someone who needs the money soon? It's the wrong choice, no matter how good last year's returns looked.

What's Actually Happening in the Markets Right Now?

Let's talk straight. The Indian stock market has been going through a rough patch recently. The Sensex and Nifty have been largely flat. Mid-cap and small-cap stocks have seen even sharper drops. Foreign investors have been pulling money out.

But here's what you need to know: This is normal.

Markets don't go up in a straight line. They never have, and they never will. They go up, they go down, they go sideways. That's just how they work.

Think about it—we've seen this before:

• 2008: The global financial crisis saw Indian markets fall nearly 60%

• 2011-2013: Markets were flat for almost three years

• 2016: Demonetization caused major volatility

• 2020: COVID crash saw markets drop 40% in weeks

• 2022: Markets corrected after the post-COVID rally

And you know what happened after each of these? Markets recovered. They always have, given enough time.

Meanwhile, while equity markets struggled recently, gold and silver prices surged—gold up significantly, silver even more. This is exactly why smart investors don't put all their eggs in one basket. Different assets perform differently at different times.

The question isn't whether markets will be volatile. They will be. The question is: Are you invested in a way that lets you sleep peacefully despite that volatility?

Why Market Crashes Feel So Scary (And How to Fix It)

Here's something interesting: two people can watch the exact same market crash and have completely different experiences. One person sleeps peacefully. The other can't sleep for weeks.

What's the difference?

It's not luck. It's not insider knowledge. It's alignment.

The person who sleeps well has investments that match their timeline and risk capacity. The person who panics? They're probably like Priya—they have their money in the wrong place for when they need it.

The Two Pillars You Need to Understand Before You Invest

Most beginner investors skip two crucial steps, and that's why market volatility feels like a crisis instead of just... normal market behavior.

1. Understanding Your Risk Profile

Your risk profile isn't about how brave you feel or how much risk you think you can handle. It's about two concrete things:

• Your ability to take risks: How long is your investment timeline? Can you financially afford to see your portfolio drop 20-30% temporarily and not need to touch that money.

• Your need to take risks: When do you actually need this money? What's it for?

A 25-year-old investing for retirement has both the ability and need to take risks through equity investments. A 35-year-old saving for a house down payment in 2 years? That's a completely different story. Same age group, completely different risk profiles.

2. Getting Your Asset Allocation Right

Asset allocation is simply how you divide your money between different types of investments—equity, debt, gold, etc.

Here's what proper asset allocation looks like based on when you need your money:

Short-term goals (0-3 years):

• Keep money in debt instruments like liquid funds, short-duration debt funds, or fixed deposits

• Equity is too volatile for short timelines

• Think of debt instruments as your "stability anchor"

Long-term goals (7+ years):

• Equity mutual funds become your friend

• You have time to ride out volatility

• Historical data shows equity typically delivers inflation-beating returns over long periods

Medium-term goals (3-7 years):

• A balanced mix of debt and equity

• Gradually shift toward safer debt instruments as your goal approaches

This isn't complicated financial theory. It's basic alignment: match your investment type to your timeline.

Your Action Plan: What to Do Right Now

If you're feeling anxious about your portfolio, here's your step-by-step plan. Not what you might do someday—what you should do today.

1. Match Your Investments to Your Timeline

Pull up your investment list right now. For each investment, ask yourself:

• When do I need this money?

• Is this investment appropriate for that timeline?

If you have money in mid-cap or small-cap funds that you need in the next 2 years, that's a red flag. These funds can easily drop 20-30% in the short term. Consider moving that money to more stable debt funds where it belongs.

2. Review Your Asset Allocation

Let's say you decided on a 60% equity, 30% debt, 10% gold split based on your risk profile and goals. After recent market movements, your actual portfolio might now be 50% equity, 35% debt, 15% gold (because equity fell and gold rose).

This is normal—markets move, and your allocation shifts with them. But it's a signal to review. Are you still comfortable with this mix? Does it still match your goals? If not, it might be time to rebalance.

3. Don't Stop Your SIPs (If You're Investing for the Long Term)

If you're investing for long-term goals through SIPs (Systematic Investment Plans), this is actually when SIPs shine. When markets fall, your monthly SIP buys more units at lower prices. This is called rupee cost averaging, and it's your secret weapon against volatility.

Stopping your SIP during a downturn is like stopping your umbrella subscription just because it's raining.

4. Build Your Emergency Fund First

Before investing another rupee in the market, ask yourself: Do I have 6 months of expenses saved in easily accessible funds (like a savings account or liquid fund)?

If not, that's your first priority—not chasing market returns. An emergency fund stops you from having to sell investments at the worst possible time when life throws you a curveball.

5. Stop Checking Your Portfolio Every Day

Seriously. If you're investing for a goal that's 10 years away, checking your portfolio daily only triggers emotional decisions. Markets will have bad days, bad weeks, even bad months. That's normal.

Check quarterly or half-yearly instead. Focus on whether you're on track for your goals, not on daily price movements. Your mental health will thank you.

Avoid These 3 Common Mistakes

Mistake #1: Chasing Past Returns

"This fund gave 40% returns last year!" might sound exciting, but it tells you nothing about future performance. More importantly, it doesn't tell you if the fund matches your risk profile and goals.

Last year's winners are often next year's underperformers. Choose funds based on your needs, not based on what did well recently.

Mistake #2: Investing in Sectoral or Thematic Funds Without Understanding the Risks

That PSU fund or IT sector fund might have given great returns last year, but these are highly cyclical. They have periods of boom and bust. They work for experienced investors who understand sector dynamics, not for beginners building their first portfolio.

Stick to diversified funds until you truly understand what you're doing.

Mistake #3: Investing Without Clear Goals

If you can't answer "Why am I investing this money and when will I need it?" you're setting yourself up for panic during volatility.

Every investment should have a clear goal and timeline attached to it:

• "This is for my daughter's education in 12 years"

• "This is for my house down payment in 3 years"

• "This is for retirement in 25 years"

Without this clarity, you'll make emotional decisions during market swings.

The Bigger Picture You Shouldn't Ignore

Here's some perspective that gets lost in the panic: every market correction presents buying opportunities for those who can withstand short-term fluctuations.

India's economic fundamentals remain strong. We're still among the fastest-growing major economies. The market corrections we're seeing now are often driven by temporary global factors—not a breakdown in India's growth story.

But—and this is crucial—this doesn't mean you should invest heavily in equity if you need the money next year. Long-term fundamentals matter only if you have a long-term horizon. If you need the money in 18 months, India's 20-year growth story won't help you if the market is down when you need to withdraw.

Match your investment horizon to your goal timeline. Always.

What Dezlo Can Teach You

At Dezlo, we believe financial peace of mind comes from understanding, not from gambling on market predictions or following your friend's "hot tip."

Our approach is simple:

• Start with your complete financial health assessment using the 4-quadrant model (liquid balances, investments, liabilities, insurance)

• Understand your unique risk profile—not your friend's or your colleague's or that influencer on Instagram

• Build asset allocation that matches YOUR goals, not market noise or trends

• Choose the right investment channel that gives you the support you need at your stage

The goal isn't to predict whether markets will crash tomorrow. No one can do that consistently. The goal is to build a portfolio that helps you sleep peacefully regardless of what markets do.

Because when your asset allocation is right, your risk profile is understood, and your goals are clear? Market volatility becomes background noise, not a crisis.

The Truth About Market Crashes

Here's what experienced investors know that beginners don't: Market crashes don't destroy wealth. Panic and poor planning do.

The difference between investors who panic and investors who stay calm isn't luck or insider knowledge. It's understanding. It's knowing that a small-cap fund dropping 20% is normal volatility—scary if you need the money next year, completely irrelevant if you're investing for 15 years.

It's having the confidence that comes from knowing you've matched your investments to your goals, not just throwing money at whatever gave good returns last year.

Want to understand how to assess your financial health, build the right asset allocation, and choose investments that actually match your goals? That's exactly what we teach at Dezlo.

Because the smartest investment you can make isn't in any particular fund—it's in your own financial education.