Nifty September fall.
The Nifty closed the September derivatives series 6.7% lower, its weakest September series performance since 2001, when the index declined 6.5%. Over the course of the series, it lost over 1,400 points and recorded its longest run of consecutive weekly declines since 2020. After hitting a six-month low, the index slipped beneath 22,600, its 200-week moving average, a level last tested during the Covid-induced sell-off.
FIIs kept selling: Selling by foreign investors continued unabated across September and into October. Indian equities saw net outflows of Rs 35,861 crore in September and Rs 52,100 crore by the middle of October, taking total withdrawals for 2026 to Rs 3.12 lakh crore, nearly twice the Rs 1.66 lakh crore pulled out over the whole of 2025.
Domestic indicators, however, told a different story. The Index of Industrial Production (IIP) rose 8.0% year-on-year in August, supported by 9.0% growth in manufacturing and a 12.3% rise in electricity and gas supply. Data on consumer durables signalled a revival in urban discretionary demand, suggesting that households were stepping up, not cutting back on, purchases of high-value goods. GDP growth remained resilient, underscoring that the economy continued to grow on its own momentum even as foreign capital moved out.
Markets like this are precisely what an SIP is designed for. Purchases continue as prices decline, the average cost of acquisition gradually falls, and there is no need to identify the bottom. The limitation, however, is structural: an SIP is a long-term commitment, not a reaction to market moves. An SIP started because the market dropped must be continued even if the decline deepens, and in September the index slipped below 22,600 without any pause.
The real trade-off with an SIP is that, if the market rebounds quickly, only a portion of the capital will have been invested by the time prices recover. In effect, some upside is sacrificed in exchange for not having to time the market.
A lumpsum investment is suitable when two conditions are met: the funds will not be required for several years, and the investor can withstand a further 10% decline without exiting. Over a 10-year period, investing the entire amount at once in a broad-based index fund tends to outperform a phased approach more often than not, since markets rise in more years than they fall.
The drawback of a lumpsum approach is that it offers no cushion if the timing proves wrong. Should the Nifty fall decisively below 22,600 and the correction deepen, an investor who invested the entire amount in October would have no cash in reserve and no room to average down further. Such a position is simple to accept on paper but far more difficult to maintain in reality, which is why the investment horizon and the investor's temperament outweigh the entry price.
An NRI mutual fund investment portfolio carries two exposures, not one: the asset and the currency it is held in. September showed how quickly both can move together, and how little of that movement had to do with the underlying economy. Episodes like this tend to test an investor's plan more than they test the market's fundamentals. How a correction feels depends largely on decisions made well before it began.
Disclaimer: This article is for informational and educational purposes only and should not be considered investment advice or a recommendation.
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