If your equity mutual fund SIP has delivered flat or negative returns over the past two years, the temptation to pause or stop your investments may be strong. But does a poor start mean the SIP is failing, or could staying invested improve the eventual outcome?
Share.Market by PhonePe has released its CRISP Mutual Fund Scorecard for the quarter ended June 2026. The report analyzed two decades of rolling SIP returns in the Nifty 500 TRI and suggests that investors may be better off extending their investment horizon rather than judging an SIP based on its first two years.
In fact, the report found that 7 in 10 five-year SIPs delivered double-digit annualised returns when the first two years had seen weak or negative returns.
What happens if your SIP is negative after two years?
Short-term weakness is not unusual. Over the past 20 years, two-year annualised SIP returns in the Nifty 500 TRI have fallen below 5% on more than 25% of occasions.
The report analysed 50 instances in which a two-year SIP delivered either negative returns or returns between 0% and 5%. Of these, 32 cases had returns of 0% or less, while 18 cases delivered between 0% and 5%.
What happened when investors continued for another three years?
For investors whose SIP had delivered negative returns in the first two years, none of the 32 instances remained negative after five years. In fact, nearly 69% delivered double-digit annualised returns.
For investors who had earned a modest 0% to 5% in two years, continuing the SIP also improved the outcome. Returns were always above 5% after five years, with nearly 72% of these cases delivering double-digit annualised returns.
The report describes this as a “slingshot effect”: a weak or correcting market is not necessarily a roadblock, because regular SIP instalments continue buying units at lower NAVs.
Does staying invested for longer reduce the risk?
The report’s longer-term data also points in that direction.
Over a five-year SIP horizon, there was still a small historical possibility of ending with negative returns, around 1%. However, the historical risk of capital loss fell to zero for seven- and 10-year SIP periods.
The report calls this “time as the ultimate risk manager”, noting that time in the market has historically softened the impact of short-term volatility.
Around 65% of 10-year SIP outcomes generated annualised returns between 10% and 15%, while another roughly 26% fell between 15% and 20%.
Together, this meant that around 90% of the 10-year SIP observations delivered double-digit annualised returns.
Which mutual fund houses showed consistency?
The quarterly scorecard also looked beyond market-level SIP returns and evaluated mutual fund schemes across categories based on performance consistency and volatility management.
HDFC, ICICI, Kotak and Nippon had the highest number of schemes with high performance consistency among their peers while avoiding outlier volatility.
The report also found that funds with high exposure to Momentum and Value styles continued to dominate in performance consistency, while funds high on the Quality style lagged.
It cautioned that “simply adopting a winning style did not guarantee consistency”, with the success of funds carrying Momentum or Value biases remaining mixed.
While several AMCs were diversifying across more than one style, Kotak stood out, with seven of its 10 funds showing high performance consistency and two showing medium consistency, according to the scorecard.
Should investors stop worrying about short-term SIP returns?
Yes.
Nilesh D Naik, Head of Mutual Funds at PhonePe, said, “With recent market cycles, it is natural for investors to worry about short-term sluggishness in their mutual fund SIPs. However, our study of SIP performance over the past two decades reinforces that the early years of a SIP do not dictate its final outcome”.
He added that “by extending their investment horizon, investors allow the true power of compounding to take over”.
Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.