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!

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