Has the SIP story become too one-sided? Shankar Sharma questions India's equity investing boom

India's systematic investment plan (SIP) culture has become one of the biggest success stories in personal finance. Monthly SIP inflows have scaled record highs, mutual funds now count crores of investors, and "SIP karo" has emerged as a widely accepted mantra for long-term wealth creation. However, veteran investor and GQuant Investech founder Shankar Sharma told the Financial Express that he believes the conversation around SIPs has become increasingly one-sided, with retail investors potentially taking on more equity risk than they realise.

In the interview, Sharma said his concern is not with SIPs as an investment tool but with the growing belief that equities are the ideal destination for a large share of household savings.

"My concern is not with SIPs as an investment mechanism but with encouraging the average Indian household to invest heavily in equities," Sharma said.

Equity-heavy approach

According to Sharma, the assumption that equities consistently deliver predictable long-term returns overlooks the significant volatility associated with the asset class. While investors often cite average annual returns of around 14% over long periods, he argued that these averages mask the fact that a disproportionate share of gains has been generated during a handful of strong bull market phases.

He noted that India's financial landscape is very different from that of developed economies, where stronger social security systems and higher household wealth allow investors to take greater risks. In contrast, many Indian households have limited financial buffers, making excessive exposure to equities potentially risky.

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Retail money and foreign investor exits

One of Sharma's most striking observations is that rising SIP inflows are unintentionally helping foreign institutional investors (FIIs) reduce their exposure to Indian equities.

"The surge in retail SIP inflows is creating an unintended transfer of wealth from Indian households to foreign institutional investors by providing them with a convenient source of liquidity to exit the market," he said.

He argued that as a capital-deficient economy, India should ideally attract foreign capital rather than facilitate its exit. Domestic institutional investors, supported by steady SIP inflows, have played a key role in absorbing selling pressure from foreign investors over the past few years, helping benchmark indices remain resilient even during periods of heavy FII outflows.

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How much equity is enough?

Sharma also challenged conventional asset allocation advice by suggesting that equities should account for no more than 5-10% of an individual's disposable net worth.

He cautioned investors against viewing equities as a dependable source of long-term returns, arguing that marketing campaigns often highlight wealth creation while downplaying market volatility and the possibility of prolonged periods of weak performance.

"High returns come with high risk," Sharma said, urging investors to assess their financial circumstances before increasing equity exposure.

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A debate that will continue

Sharma's views run counter to the mutual fund industry's long-standing position that disciplined SIP investing, backed by rupee-cost averaging and long investment horizons, is among the most effective ways for retail investors to participate in equity markets. Financial planners also generally recommend asset allocation based on an individual's age, financial goals and risk appetite rather than a fixed cap on equity exposure.

Nevertheless, Sharma's remarks are likely to reignite debate over whether India's booming SIP culture has created unrealistic expectations about equity returns. His criticism is not of SIPs themselves, but of the growing perception that equities are a predictable and low-risk path to wealth creation. As retail participation in markets continues to expand, the discussion over balancing growth opportunities with risk management is likely to become even more relevant.