SIP inflows hit ₹1.26 lakh crore in April-July: Is too much money chasing too few stocks?

India’s systematic investment plan (SIP) machine has grown rapidly, but economic commentator Vivek Kaul argues that its success may be changing the market conditions that helped investors generate strong returns in the first place. With ₹1.26 lakh crore invested through SIPs between April and July 2026, Kaul questions whether sustained inflows are adding to stock demand faster than corporate earnings can justify.

In his analysis, Kaul said the scale of SIP investments has significantly increased the amount of money flowing into Indian equities. He argued that this has helped push up stock prices and sustain valuations even as company earnings have struggled to keep pace.

SIP money is reshaping equity demand

Kaul pointed to the sharp rise in SIP investments over recent years. According to him, ₹1 lakh crore was invested through SIPs in 2019-20, compared with ₹3.5 trillion in 2025-26. Between April and July 2026 alone, investors put ₹1.26 lakh crore into SIPs.

The surge has also been reflected in equity mutual fund participation, with Kaul noting that the number of equity MF folios increased from 63 million in March 2020 to 123 million by March 2024 and 183 million by March 2026.

“Indeed, SIPs have several things going for them. By investing regularly, an investor doesn’t try to time the market,” Kaul wrote.

However, he argued that the sheer volume of money now entering the market has consequences. “Nonetheless, it’s safe to argue that the popularity of SIPs has made them victims of their own success, with perhaps too much money now being invested through them.”

Kaul said the resulting demand has contributed to higher stock prices, while elevated valuations have also played a role in foreign investors selling Indian stocks.

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Why past SIP returns may not repeat

Kaul highlighted another problem: the market conditions that made SIP investing particularly effective in the past have changed.

He noted that investors who started SIPs earlier benefited from periods when stock prices were lower. They were therefore able to accumulate more mutual fund units at relatively cheaper valuations.

“The average 3-year regular SIP return on flexi-cap funds—a popular category of equity MFs—is 7.8% per year,” Kaul wrote, adding that five-year returns average 11.8% annually, while 10-year returns average 14.1%.

But, according to Kaul, these historical returns should not automatically be used as expectations for future performance.

“Those conditions have changed. Hence, past returns simply can’t be extrapolated into the future,” he wrote.

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Is too much money chasing too few stocks?

Kaul also argued that the equity mutual fund universe was smaller when earlier SIP investors entered the market, meaning there was less competition for stocks and fund managers could find reasonably priced opportunities more easily.

Today, he said, the massive flow of SIP money means fund managers are deploying much larger sums into equities, potentially contributing to elevated valuations.

His broader warning is not against SIPs as an investment mechanism, but against assuming that their past success guarantees similar outcomes ahead.

“So, before those in the business of managing other people’s money, the OPM wallahs that is, put the SIP success story into yet another AI-generated presentation deck, perhaps they should also tell investors that this investing game has changed,” Kaul wrote.

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