Sensex at 25 Lakhs by 2050

It is difficult to make predictions, specially about the future said somebody famous. And now that I got the attention due to the headline, let me clarify that this post is not about predictions for the Sensex.

I just thought it may be interesting to present a set of figures on long term returns from Indian equity over the past 15 years, and try to make a case for long term investing in equity – like people do in real estate in our country.

The HDFC Mutual fund site has an interesting tool which allows you to enter a starting date and provides Sensex returns values over various rolling periods from that date i.e. 1 year to 15 years. So I put in 1 Jan 1999, and here is the summary of observations:

Summary of Observations
Returns (%)
Date SENSEX 1 Year 3 Years 5 Years 7 Years 10 Years 12 Years 15 Years
1-Jan-99 3060
30-Dec-99 5006 63.57
1-Jan-01 3955 -20.99
1-Jan-02 3246 -17.92 1.98
1-Jan-03 3390 4.44 -12.18
1-Jan-04 5915 74.49 14.36 14.09
31-Dec-04 6603 11.62 26.7 5.69
30-Dec-05 9398 42.33 40.48 18.9 17.38
29-Dec-06 13787 46.7 32.58 33.54 15.57
1-Jan-08 20301 47.25 45.41 43.04 26.32
1-Jan-09 9903 -51.22 1.76 10.86 17.27 12.46
31-Dec-09 17465 76.35 8.2 21.48 26.39 13.31
31-Dec-10 20509 17.43 0.34 16.89 19.44 17.89 17.18
30-Dec-11 15455 -24.64 15.99 2.31 12.92 16.89 9.85
1-Jan-13 19581 26.7 3.89 -0.72 11.06 19.17 14.26
1-Jan-14 21140 7.97 1.02 16.38 6.3 13.58 16.9 13.75
1-Jan-15 27507 30.11 25.99
Yearly Rolling Returns 15 13 11 9 6 4 1
Negative Returns 4 1 1 0 0 0 0

As is evident, for all the ups and downs over the past 15 years, we have been lucky to have had only 4 years really with a negative return out of the past 15 years.

And as the rolling number of years increase, the variation in returns and number of negative return sets reduce.

In every 1 to 3 year period, there is a high chance of losses based on when you enter.

If one stayed invested during any 7 year period in Indian markets in the last 15 years, it would be improbable to lose money irrespective of when you entered.

I could not include 1-Jan-2015 in these calculations – in which case I am sure the numbers would have looked even more positive – given the record highs during the past year or so.

Any 10 year period of staying in the market almost guarantees no losses and a reasonably good return. That in itself should make a case for real long term investing in equities. And the same continues and gets surer over 12 or 15 year periods.

And if I simply take the 13.75% over the past 15 years and extrapolate it to 2050, simple mathematics says that 25 lakhs on the Sensex is likely!

3 Responses to Sensex at 25 Lakhs by 2050

  1. Anonymous says:

    Interesting Analysis

  2. Sid says:

    Even if we are around till 2050, don’t know if we will be able to enjoy the moment. So live for now. Celebrate Sensex hitting 30K…agey dekhi jayegi

  3. Prashant Sant says:

    Hi Ranjit,
    Thanks for sharing this analysis.
    It would also be an interesting exercise / analysis to calculate the net return after allowing for the inflation over the time period. If you have come across such a tool , would be great if you share that one also.

    Prashant

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