Loss of capital is possible in any investment mode. Even in a bank fixed deposit, if the bank goes bankrupt. Banks only insure up to one lakh rupees as per regulation.
Inflation anyway eats away your capital. So if you are holding cash of say one lakh rupees, after 5 years the capital will not buy you the same quantity of goods.
An SIP is only a vehicle to invest in a specific mutual fund or equity instrument. It is the fund that loses value, not the SIP per se.
How to avoid such loss: invest in a good equity instrument via SIP or lumpsum; this could be an equity index mutual fund or direct equity with the help of a trusted investment advisor.
Disclaimer:
I am a SEBI Registered Investment Advisor, however the answers here should not be considered as investment advice. Please contact me via the information shown in the profile for any investment advice related to direct equities or other investments.
