Markets Could Have Fallen 40-50% Without Strong SIP Inflows: Vikas Satija

Domestic Investors Are Cushioning India’s Market Downturn

Steady SIP contributions and domestic institutional buying are helping absorb foreign selling, but they do not remove the risks of a weak market cycle.

Domestic flows are changing the drawdown equation

India’s equity market is facing substantial foreign selling, but retail investors and domestic institutions have provided a source of demand. Foreign portfolio investors have sold a record ₹3.08 trillion so far this year, while SIP inflows stood at ₹2.51 trillion in the first nine months of 2026. The Sensex is nevertheless down 14% so far this year, underlining that domestic buying can cushion pressure without preventing losses.

Satija said comparable foreign outflows in earlier downturns could have led to a 40% to 50% market drawdown under the conditions that prevailed then. That is his assessment of how the market might have behaved, not a measure of losses avoided with certainty. The contrast points to a deeper change in the market’s sources of capital: regular domestic contributions can help absorb selling, even when overseas investors are reducing exposure.

Investor behaviour appears measured, not panicked

Satija described investors, including high-net-worth and ultra-high-net-worth clients, as looking for opportunities and rebalancing portfolios rather than panicking. That account suggests some investors are treating the decline as a period to reassess exposure, although it should not be read as evidence that all investors share the same appetite for risk or have the same investment horizon.

For markets, the distinction matters. Persistent domestic participation may provide support during bouts of foreign selling, but sentiment and prices can still weaken when investors reassess growth prospects or risk. Satija said shorter, faster cycles have made familiar market episodes feel more compressed. His comparison with past crises is a reminder that volatility is not new, though each period brings different conditions.

Asset allocation matters more than short-term calls

A central part of Satija’s message was that portfolio outcomes depend heavily on long-term asset allocation. He cited a 95% contribution from asset allocation to portfolio returns and argued that the split between asset classes matters more than choosing between two individual funds. The figure is his stated view; investors should consider their own financial goals, time horizon and capacity to absorb losses before changing that mix.

He advised distinguishing structural changes from short-lived moves driven by overnight news. That does not mean investors should ignore new information: a lasting change in the investment case may warrant a review. But frequent portfolio changes in response to daily volatility can undermine a plan designed for a longer period. Regularly checking whether the portfolio remains aligned with its intended allocation is different from trying to time every market swing.

India’s growth case remains a long-term argument

Satija pointed to GDP growth of 6.5% to 7% and inflation of 3.5% to 4% as reasons for his confidence in India’s longer-term prospects, saying the country could still offer the potential for double-digit returns. These are his outlook and return assessment, not guaranteed outcomes. A constructive economic view does not remove equity risk, and the current market decline shows that long-term potential and near-term performance can diverge.

He also noted that different markets lead at different times, citing periods when overseas markets or Korea performed better. For Indian investors, that is a case for avoiding the assumption that one market or theme will always outperform. Diversification and a suitable allocation can help investors navigate shifting cycles, but neither guarantees returns or prevents losses.

Key Highlights

• FPI selling has reached ₹3.08 trillion so far this year, while the Sensex is down 14%.
• SIP inflows totalled ₹2.51 trillion in the first nine months of 2026.
• Satija said domestic participation has helped make the market more resilient to foreign selling.
• His 40% to 50% drawdown estimate describes a hypothetical comparison with earlier market conditions.
• He emphasised long-term asset allocation and cautioned against reacting to temporary news-driven moves.

Investor Note: SIP inflows may support market resilience, but they cannot guarantee a floor for share prices. Investors should assess their risk tolerance, time horizon and asset allocation before making changes, and treat return expectations as uncertain rather than assured.