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:

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!