Performance Chasing versus Investment Persistence in SIPs: Evidence from Indian Equity Mutual Funds

Abstract

This study examines whether shifting Systematic Investment Plan (SIP) contributions to recently top-performing Indian
equity mutual funds generates better long-term outcomes than continuing SIP investments in the same fund. The study
covers 50 actively managed open-end equity schemes across five categories—Large-Cap, Mid-Cap, Small-Cap, Flexi-Cap,
and ELSS January 2015 to March 2025.Data are drawn exclusively from publicly available sources, including AMFI,
SEBI, NSE, BSE, Value Research Online, CRISIL, and RBI. Two investment strategies are compared. The Persistence
Portfolio continues a fixed monthly SIP of ₹5,000 in the same fund throughout the investment period, whereas the
Performance-Chasing Portfolio shifts the SIP annually to a fund that belonged to the previous year's top-performing quartile
within the same category. Panel regression, paired t-tests, Wilcoxon signed-rank tests, and binary logistic regression are
used to examine the study's five formal hypotheses and compare investment persistence with performance-chasing
behaviour.
Findings indicate that recent absolute returns exert a significantly stronger influence on SIP inflows (β = 0.31, p < 0.001)
than risk-adjusted performance (β = 0.09, p = 0.048). Investors who maintained uninterrupted SIPs earned an average
annual return advantage of approximately 340 basis points over those who switched funds based on past performance,
accumulating materially higher terminal wealth with lower volatility and smaller maximum drawdowns. These results
suggest that investment discipline consistently outperforms performance chasing and carry direct implications for investor
education, mutual fund distribution practices, and policy design aimed at sustaining long-term retail participation in India