Time for lump sum or aggressive SIP top-ups? Expert decodes the investment strategy in falling markets

Heightened geopolitical tensions and market volatility are keeping investors on edge. Ajay Tyagi, head of equities at UTI Asset Management Company, said investors should stay disciplined and avoid knee-jerk decisions, especially in systematic investment plans (SIPs).

In an interview with Anil Singhvi of Zee Business, Tyagi said uncertainty around the ongoing conflict remains the key overhang for markets. He flagged risks to global crude oil prices and supply chains.

Uncertainty makes short-term market direction hard to predict

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Tyagi said it is difficult to assess how long the conflict will last or how high crude prices could rise, particularly for oil-importing countries like India.

“Too many variables are at play—duration of the war, trajectory of oil prices, and whether key shipping routes remain accessible. This makes near-term market predictions extremely challenging,” he said.

Valuations still stretched in mid- and small-caps

Despite the recent correction, Tyagi maintained that valuations in mid- and small-cap stocks remain elevated compared to historical averages.

He said large-cap stocks, in contrast, have moved closer to fair valuation levels and offer relatively better comfort for investors.

“Even after the correction over the past few months, mid- and small-caps are still expensive. Large-caps are now in a fair value zone, though they are not outright cheap,” he said, adding that markets can still fall below average levels in the short term.

Don’t break SIP discipline during market downturns

Tyagi strongly advised investors against stopping SIPs during volatile phases, noting that falling markets often create better long-term opportunities.

“It is psychologically difficult to invest in falling markets, but that is when you are effectively buying businesses at lower prices,” he said.

He cited past episodes such as the Global Financial Crisis and the COVID-19 pandemic market crash, when SIP returns turned negative even over five-year periods but recovered sharply within a year.

“In both cases, five-year SIP returns moved back into double digits within a year of the downturn,” he added.

Avoid lump sum or aggressive SIP top-ups for now

On whether investors should increase allocations, Tyagi said current valuations do not justify aggressive moves.

“This is not the time to double SIPs or deploy large lump sums. Continue with existing SIPs and wait for better entry points if markets correct further over the next few months,” he said.

Large-cap and hybrid funds preferred in current market

Tyagi recommended focusing on large-cap-oriented funds and hybrid strategies such as balanced advantage and multi-asset allocation funds.

He said these funds offer better downside protection due to diversified exposure and dynamic asset allocation.

“In dynamic hybrid funds, equity allocation increases automatically when markets fall, which helps investors benefit without needing to time the market,” he said.

IT sector offers opportunity after recent correction

Among sectors, Tyagi highlighted information technology as an attractive opportunity after recent declines.

He acknowledged concerns around artificial intelligence disrupting business models but said past technological shifts—such as enterprise software and cloud computing—ultimately created growth opportunities for IT companies.

“AI could expand the software ecosystem further, increasing demand for IT services over time,” he said, adding that investors with a two- to three-year horizon may find the sector appealing.