Sensex down over 10,800 points in 2026. Should mutual fund investors stay invested, increase SIPs or wait for clarity?

With the benchmark BSE Sensex down more than 10,894 points to 74,294 as of September 18, 2026, many investors are wondering whether to continue with SIPs and lumpsum investments during the market correction, hold their existing investments, or wait for greater clarity on the market's direction.

Financial planners and market experts say investors should avoid making decisions based solely on short-term market movements. The approach, however, may differ depending on an investor’s time horizon, risk appetite, existing asset allocation and liquidity needs.

Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial Radiance told ETMutualFunds that investors should continue their SIPs rather than wait for ideal market conditions.


According to him, sudden declines can be unsettling, but market timing is rarely successful. Investors with a long-term horizon and the ability to tolerate risk can consider gradually increasing their equity exposure. A single large investment is not the only approach, although it can be done selectively if the investor has sufficient liquidity.

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Manish Kothari, CEO & Co-Founder, ZFunds shared with ETMutualFunds that the Sensex's over 10,800 points correction in 2026 reflects two years of extreme volatility, with headline indices still below their September 2024 peaks. He said valuations have turned reasonable at around 18-19 times one-year forward earnings, below long-term averages, offering a margin of safety.

According to Kothari, existing investors should remain invested, while those with running SIPs or STPs can accelerate or front-load them. He said catching the market bottom is near-impossible and fresh investors can consider deploying money in two to three tranches rather than waiting for clarity.

Should investors use the correction to rebalance their portfolios?

In the current calendar year, the benchmark index has corrected nearly 13% from a level of 85,188 on January 1, 2026 to 74,294 as of September 18, 2026.

According to the data on ACE MF, in the last one year, the benchmark index corrected 10.08% and nearly 3.26% in the last three months. In the last six months, it gained marginally of around 0.11%.

A market correction can change the equity-debt mix of a portfolio. For investors whose equity allocation has fallen below their strategic target because of market movements, rebalancing can be a way to restore the intended asset allocation.

Kothari said the correction can be a reasonable trigger to rebalance. If equity allocation has drifted below the strategic target, investors can use this point to bring it back in line rather than treating the fall passively. He also said portfolio rebalancing, along with a distributor or registered investment adviser, should form part of a long-term investment strategy.

Minocha said rebalancing can help restore the intended asset mix when equity allocation falls below the target. According to him, this keeps the investment strategy on track and helps prevent emotional reactions to market fluctuations. However, short- and medium-term liquidity requirements should not be invested in high-risk equity funds.

Mutual fund categories to choose

Once investors decide to deploy fresh money, the next question is which mutual fund category to choose. Large-cap, flexi-cap, mid-cap and small-cap funds have different levels of market exposure and volatility, making the choice dependent on the investor's existing portfolio and risk profile.

ETMutualFunds checked the performance of pure equity mutual fund categories in the current calendar year so far. Small cap funds emerged as the top performer with an average return of 15.09%, followed by mid cap funds who gave an average return of 6.22%. Multi cap funds gave an average return of 4.54% in 2026 so far.

Large cap funds lost the most on an average of around 5.40% in 2026 so far, followed by contra funds who gave a negative average return of 4.78% and ELSS funds who gave an average return of 1.98%.

Minocha said flexi-cap, large & mid-cap and multi-cap funds may offer greater stability when investing new money because the fund manager can decide which market-cap segments to invest in. Mid-cap and small-cap funds have higher growth potential but also carry greater volatility and valuation risk. He said risk tolerance and the existing portfolio should guide the selection.

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Kothari said the right category depends on an investor's risk appetite and time horizon. He noted that large caps have underperformed mid- and small-caps over the past three to five years, while valuations may provide greater comfort and margin of safety in the large-cap segment.

Kothari also said mid- and small-cap stocks offer stronger earnings growth potential and greater scope for stock selection, although valuations remain relatively rich. He said flexi-cap and multi-cap strategies can be suited to investors looking for exposure across market-cap segments, as fund managers can move between segments based on relative attractiveness.

For aggressive investors seeking direct exposure, Kothari said pure-play mid- and small-cap funds can also be considered, while investors should review their existing market-cap allocation to ensure it matches their risk profile.

Cash in hand? SIPs or STPs?

Investors who have been waiting in cash may be tempted to invest a large amount after a market correction. However, uncertainty about whether markets have bottomed can make the timing of a lump-sum investment difficult.

Kothari said investors sitting on cash can use a gradual deployment approach, with the same two- to three-tranche strategy rather than waiting for complete clarity. He said catching the bottom is near-impossible, making phased deployment a way to participate without committing the entire amount at once.

Minocha said a gradual investment approach, such as using an STP or splitting purchases, is advisable during periods of high market volatility. This can reduce the risk associated with investing a lump sum at an unfavourable time and can also discourage investors from waiting indefinitely for the market bottom.

If a mutual fund has underperformed, should investors stay invested or switch?

A correction can make short-term underperformance look more pronounced, but a fall in NAV by itself does not necessarily indicate that a mutual fund's strategy has broken down. Investors need to assess the fund's investment style, benchmark, portfolio and longer-term performance before deciding whether a change is warranted.

According to the performance chart, large cap funds on an average lost 5.40%. There were 33 large cap funds in the said time period of which Mahindra Manulife Large Cap Fund lost the most of around 10% with others losing upto 3%.

Minocha said investors should avoid making changes solely because a fund has declined recently. He recommends reviewing equity fund performance over a minimum five-year period rather than focusing on short-term fluctuations. An exception, he said, could be a change in the fund manager's strategy or whether the original investment rationale remains valid.

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Minocha added that he recently completed a detailed analysis of more than 450 families he manages and found a strong correlation between clients' average holding periods and their CAGR returns. According to him, all clients with an average holding period of more than four years continued to have double-digit growth, while around 40% of clients with an average holding period of one year had negative returns.

Kothari said investors should first understand a fund's nature and beta. A high-beta or aggressive-style fund is expected to fall more sharply than the broader market during a correction, and that alone should not be treated as a red flag. The fund's performance should be assessed against what its investment style would normally imply rather than against a low-beta benchmark.

He also advised investors to check whether the fund has remained consistent with its stated investment style and process. A temporary period when a value or quality tilt is out of favour is different from a genuine deviation from the fund's stated process.

Kothari said changes involving the fund manager, investment philosophy or portfolio strategy also warrant closer scrutiny and may justify a switch. At the same time, he said short-term underperformance over one or two quarters should not trigger a switch on its own. Investors should evaluate performance over a three- to five-year rolling period while setting a clear review checkpoint rather than holding a fund indefinitely without reassessment.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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