SIP Returns Turn Negative Amid Iran War

Global markets have been experiencing significant turbulence in early 2026, with the escalating geopolitical conflict involving the US, Israel, and Iran sending shockwaves across equity markets worldwide. For Indian mutual fund investors, this volatility has translated into an uncomfortable reality — SIP portfolios that were steadily building wealth are now showing negative returns. While this can be alarming for investors, particularly those who are new to the market, it is important to understand that negative SIP returns during periods of global uncertainty are not unusual. Market history consistently shows that geopolitical disruptions cause short-term pain but rarely derail long-term financial goals. This article explains why SIP returns are under pressure, what is driving the decline, and — most importantly — what investors should do to protect and grow their wealth through this period of uncertainty.

In early 2026, many equity mutual fund SIP portfolios across India have slipped into negative return territory, leaving investors concerned about the safety and effectiveness of their investments. The primary trigger has been the escalating geopolitical conflict in West Asia, which has caused a broad-based sell-off in global equity markets. Indian markets have not been immune — the Sensex and Nifty both saw sharp declines as foreign institutional investors pulled capital out of emerging markets in favour of safer assets. For investors whose SIP tenures are relatively short — typically one to two years — the current portfolio value may now be below the total amount invested, resulting in what appears as a loss on paper. It is important to note that these are unrealised losses, meaning they exist only on paper and do not crystallise unless units are actually redeemed at current prices.

Disclaimer: Past market behaviour is not a guarantee of future performance. Returns on mutual fund investments are subject to market risks.

Several interconnected factors are contributing to negative SIP returns in the current environment:

• Geopolitical uncertainty: The ongoing conflict involving the US, Israel, and Iran has triggered widespread risk aversion globally, causing investors to move away from equities and toward safer assets such as government bonds and gold.
• Rising crude oil prices: India imports a significant portion of its crude oil requirements. Elevated oil prices increase inflation, widen the current account deficit, and put pressure on corporate margins — all of which weigh on equity valuations.
• Currency depreciation: A weaker rupee increases import costs and reduces the attractiveness of Indian assets for foreign investors, further adding selling pressure on equities.
• Foreign institutional investor outflows: Global uncertainty has prompted FIIs to reduce exposure to emerging markets including India, creating sustained selling pressure across market segments.
• Elevated inflation expectations: Higher energy prices feed into broader inflation, reducing the probability of interest rate cuts and keeping borrowing costs elevated — a headwind for equity valuations.

• Short investment tenure: Investors with SIP tenures of less than two to three years have had insufficient time for rupee cost averaging to work effectively, making their portfolios more sensitive to short-term market swings.

  
  

Disclaimer: The factors mentioned above are general in nature. Individual portfolio impact will vary depending on fund category, investment tenure, and market conditions.

Short-term SIPs — those running for one to two years — are most vulnerable during periods of sharp market decline. This is because these investors have not had enough time to accumulate units across multiple market cycles, which is the foundation of rupee cost averaging. When markets fall sharply early in a SIP journey, the portfolio has not yet built up enough low-cost units from previous months to offset the impact of the decline on the overall average.

In contrast, investors who have been running SIPs for five years or more are in a meaningfully different position. Their portfolios contain units purchased across multiple market phases — including previous corrections — at significantly varying NAVs. This diversity in purchase prices means their average cost per unit is much lower, giving their portfolios a buffer against current market declines.

It is also worth noting that short-term negative returns do not reflect the fundamental quality of the underlying mutual fund or its long-term potential. A well-managed equity fund may show negative returns over one year during a market downturn but deliver strong compounded returns over a five or ten-year period. The key variable is not the fund — it is the time given to the investment to recover and grow.

Facing negative returns on a SIP portfolio is emotionally challenging, but the response to that discomfort will determine long-term investment outcomes far more than the market conditions themselves. Here is practical guidance for navigating this period:

• Do not stop your SIPs. This is the single most important piece of advice for investors in a falling market. When markets decline, your fixed monthly SIP amount purchases more mutual fund units at lower prices. This is rupee cost averaging — and it works most powerfully during exactly these kinds of market downturns. Stopping your SIP means you miss the opportunity to accumulate units at lower NAVs, which will be the foundation of your recovery gains when markets rebound.
• Do not redeem in panic. Redeeming your SIP investments when markets are down converts what is currently a paper loss into a real, permanent loss. Once you exit, you also remove yourself from the recovery. History shows that the steepest market recoveries often happen quickly and without warning — investors who are not in the market when the rebound begins miss the most significant gains.
• Review your asset allocation. If the current volatility is causing you significant anxiety, it may be a signal that your portfolio has more equity exposure than your risk tolerance can comfortably accommodate. The appropriate response is not to exit equity entirely but to gradually rebalance toward a mix that lets you stay invested without emotional distress. Consider adding allocation to debt funds or hybrid funds to reduce overall portfolio volatility.
• Consider increasing SIP contributions if possible. For investors with sufficient income stability, a period of market correction is actually an opportunity to invest more and accumulate units at lower prices. Even a modest top-up to your existing SIP during this period can meaningfully improve your long-term corpus.
• Maintain an emergency fund. Ensure that your emergency fund — ideally six to twelve months of living expenses — is held in liquid, low-risk instruments such as a high-yield savings account or liquid mutual fund. This separation ensures you never need to dip into your long-term SIP investments to meet short-term financial needs, regardless of market conditions.

• Focus on your financial goals, not daily NAV movements. Your SIP was started to fund a specific goal — retirement, education, a home purchase. That goal has not changed because of a geopolitical conflict. Evaluating your portfolio against your goal timeline, rather than against last month's NAV, provides a far more useful and accurate perspective.

  
  

Disclaimer: The advice above is general in nature. Individual financial circumstances vary. Please consult a SEBI-registered financial advisor for personalised guidance.

Market history offers an important and consistent lesson: geopolitical events, as serious as they are, have rarely derailed long-term equity market growth. Every major global conflict or crisis of the past three decades — the Gulf War, the 9/11 attacks, the 2008 global financial crisis, the COVID-19 pandemic — caused sharp short-term market corrections. In each case, markets eventually recovered and, over longer periods, went on to make new highs.

Analysis of six major geopolitical events between 1990 and 2026 shows that the Sensex delivered average returns of approximately 28% over three months and 38% over six months following the initial correction phase. This does not mean every recovery happens at the same speed or with the same magnitude — but it does illustrate that patient investors who stayed in the market through periods of uncertainty were historically rewarded.

For SIP investors specifically, this historical context is particularly reassuring. The very mechanism of SIP investing — fixed monthly contributions regardless of market conditions — is designed to perform well across market cycles. During downturns, you accumulate more units. During recoveries, the value of those accumulated units rises. The combination of these two effects, sustained over a long period, is what drives meaningful wealth creation through SIPs.

India's long-term macroeconomic fundamentals also remain broadly intact despite near-term turbulence. A large and growing domestic consumer market, increasing financial inclusion, expanding digital infrastructure, and a demographic dividend that will continue to drive consumption and economic activity for decades — these structural drivers of equity market growth have not been altered by the current conflict.

It is also worth remembering that market volatility is not a sign that something has gone wrong with your investment strategy. Volatility is a normal, expected feature of equity investing — it is the price you pay for the superior long-term returns that equities have historically delivered over other asset classes. The investors who build the most wealth over their lifetimes are not those who avoided volatility — they are those who remained invested through it.

Zooming out from the current headlines and reconnecting with your original investment rationale is one of the most valuable things you can do as an investor right now. Why did you start your SIP? What goal were you working toward? How many years remain in your investment horizon? These questions matter far more than today's NAV.

Negative SIP returns during a period of global geopolitical conflict are uncomfortable but not unusual. The Iran-US-Israel conflict has created genuine market turbulence, and short-term portfolio values have reflected that uncertainty. However, the fundamental case for long-term SIP investing remains unchanged. Rupee cost averaging, the power of compounding, and the historical resilience of equity markets across geopolitical cycles all point in the same direction — patience and consistency are rewarded over time. The most important decision an investor can make right now is to stay invested, keep SIPs running, and resist the urge to make reactive decisions based on short-term market movements. Volatility is temporary. Long-term financial goals are not.