A Dream Run of the Sensex since 1979: A Killer Return

A Dream Run of the Sensex since 1979: A Killer Return

Equity advisors or mutual fund agents always give examples of Sensex performance since 1979 to convince retail investors.

Is the performance of the Sensex so excellent?

The answer is “Yes”

BRIEF ABOUT THE SENSEX PERFORMANCE SINCE 1979

The Sensex started in 1979. At that time its value was only 100. In the year 2020, the Sensex completed 41 years. In these 41 years, many events like Harshad Mehta scam, the 2008 financial crisis happened in the Sensex. Many bull and bear markets came and went. Going through all that, today the Sensex is trading at 32000 in 2020.

In these 41 years, it has given a CAGR of 15% without dividends. If you look at the Sensex performance, in the long run it has outperformed all other classes present in India. Your small investment of Rs 1 lakh in the Sensex in 1979 would have been Rs 2.94 crore today.

SENSEX HISTORICAL PERFORMANCE DATA(1979-2020)

Sensex performance since 1979

BRIEF ABOUT SENSEX

  • Sensex is the benchmark index of the Bombay stock exchange(BSE).
  • It is the oldest index in the country.
  • It is made up of 30 companies and these 30 companies are known as Bluechip companies.
  • The base year of Index is 1978-79 and the base value is 100.
  • Due to is wide acceptance amongst the investors, It is regarded to be the pulse of the Indian stock market.

SENSEX HISTORICAL DATA (1979-2020)

YEARSENSEX HISTORICAL
DATA(1979-2020)
1-YEAR RETURNINITIAL 1 LAKH BECOMES
19791001,00,000
1980128.5729%
1,28,570
1981173.4435%1,73,440
1982217.7126%2,17,710
1983211.51-3%2,11,510
1984245.3316%2,45,330
1985353.8644%3,53,860
1986574.1162%5,74,110
1987510.36-11%5,10,360
1988398.37-22%3,98,370
1989713.679%7,13,600
1990781.059%7,81,050
19911167.9750%
11,67,970
19924285267%42,85,000
19932280.52-47%22,80,520
19943778.9966%37,78,990
19953260.96-14%32,60,960
19963366.613%33,66,610
19973360.890%33,60,890
19983892.7516%38,92,750
19993739.96-4%37,39,960
20005001.2834%50,01,280
20013604.38-28%36,04,380
20023469.35-4%34,69,350
20033048.72-12%30,48,720
20045590.683%55,90,600
20056492.8216%64,92,820
200611279.9674%1,12,79,960
200713072.116%1,30,72,100
200815644.4420%1,56,44,440
20099708.5-38%97,08,500
201017527.7781%1,75,27,770
201119445.2211%1,94,45,220
201217404.2-10%1,74,04,200
201318835.778%1,88,35,770
201422386.2719%2,23,86,270
201527957.4925%2,79,57,490
201625341.86-9%2,53,41,860
201729620.517%2,96,20,500
201832968.6811%3,29,68,680
201938672.9117%3,86,72,910
202029468.49-24%2,94,68,490

YEAR 1979-1992

It was the year 1979. The Sensex started its journey with 100 points.

The performance of the Sensex in the first 13 years has been surprising. It had risen from 100 to 4285 (43 times) in 13 years.

The Sensex returned about 33% CAGR in the first 13 years.

SENSEX PERFORMANCE BETWEEN 1979-2000

SENSEX PERFORMANCE BETWEEN 1979-2000

IMPORTANT POINTS FROM ABOVE TABLE

MAX RETURN267%
MIN RETURN-22%
NO.OF POSITIVE YEARS10
NO.OF NEGATIVE YEARS3
CAGR RETURN33%

YEAR 1993-2003

After 13 years of dream run, the Sensex rally came to a halt in 1993. In just one year, the Sensex fell 47%.

The main cause of the downfall was the Harshad Mehta scandal, which took place in 1992.

HARSHAD MEHTA SCAM

The 1992 scam was the largest stock market scam ever committed in the Indian stock market. The main culprit in this scam was the well-known stock broker Harshad Mehta. The 1992 scam was a systematic stock fraud using bank receipts and stamp paper that caused the Indian stock market to collapse.

This table illustrates the extent of money certain banks lost.

If you are really curious to know how the Harshad Mehta scam happened, read on

1992 Indian stock market scam

SENSEX PERFORMANCE BETWEEN 1993-2003

SENSEX PERFORMANCE BETWEEN 1993-2003

IMPORTANT POINTS FROM ABOVE TABLE

  • In early 1993, the Sensex was at 2280 points, and at the end of 2003, it was close to 3048.
  • Between 1993-2003, in 11 years, the Sensex remained flat.
MAX RETURN66%
MIN RETURN-47%
NO.OF POSITIVE YEARS5
NO.OF NEGATIVE YEARS6
RETURN3%

YEAR 2003-2008

After 10 years of inactivity, the Sensex started to rebound.

SENSEX PERFORMANCE BETWEEN 2003-2008

SENSEX PERFORMANCE BETWEEN 2003-2008

IMPORTANT POINTS FROM ABOVE TABLE

  • That boom was for 5 years.
  • The Sensex returned positively in all 5 years.
MAX RETURN83%
MIN RETURN16%
NO.OF POSITIVE YEARS5
NO.OF NEGATIVE YEARS0
CAGR RETURN29%

END OF THE BULL MARKET

The bull market ended in 2008 due to the global financial crisis. The Sensex lost more than 38% of its value in a single year.

The year 2008 was a terrible year for all investors. No one expected such a situation. Those who lost their money in this crisis will never return to the market for years.

But Warren Buffett has famously said that the stock market is for the long term and not for the short term. These quotes came true and in 1.5 years, the Sensex starts to bounce back.

SENSEX PERFORMANCE IN THE LAST 10 YEARS (2010-2019)

The Sensex resumed its glory and rose more than 81% in 2010.

SENSEX PERFORMANCE BETWEEN (2010-2020)

SENSEX PERFORMANCE BETWEEN (2010-2020)

In 10 years, the performance of the Sensex was slow and steady type. There was no major shock in the market.

The Index came down only 3 times in 11 years and the fall was not as heavy as in 2008.

The Sensex rose from 17,527 in 2010 to 38,672 in 2019.

MAX RETURN81%
MIN RETURN-10%
NO.OF POSITIVE YEARS8
NO.OF NEGATIVE YEARS3
CAGR RETURN15%

COVID-19 PANDEMIC

As is the nature of the market, there has been a big shock in the market again this financial year and it has been caused by the coronavirus.

The decline is not due to any financial instability but due to uncertainty about people’s health.

USEFUL LESSONS FROM SENSEX PERFORMANCE

          
SR NOYEARSENSEX
HISTORICAL
DATA
1-YEAR3-YEARS5-YEARS7-YEARS10-YEARS15-YEARS20-YEARS
01979100
11980128.5729%
21981173.4435%
31982217.7126%30%
41983211.51-3%18%
51984245.3316%12%20%
61985353.8644%18%22%
71986574.1162%39%27%28%
81987510.36-11%28%19%22%
91988398.37-22%4%13%13%
101989713.679%8%24%18%22%
111990781.059%15%17%21%20%
1219911167.9750%43%15%25%21%
1319924285267%82%53%43%34%
1419932280.52-47%43%42%22%27%
1519943778.9966%48%40%33%31%27%
1619953260.96-14%-9%33%35%25%24%
1719963366.613%14%24%25%19%22%
1819973360.890%-4%-5%23%21%20%
1919983892.7516%6%11%19%26%21%
2019993739.96-4%4%0-2%18%20%20%
2120005001.2834%14%9%12%20%19%20%
2220013604.38-28%-3%1%-112%13%16%
2320023469.35-4%-2%0%1%-2%14%15%
2420033048.72-12%-15%-5%-1%3%15%14%
2520045590.683%16%8%8%4%15%17%
2620056492.8216%23%5%8%7%15%16%
27200611279.9673%55%26%17%13%16%16%
28200713072.116%33%30%15%15%8%18%
29200815644.4420%34%39%23%15%14%20%
3020099708.5-38%-5%12%16%10%6%14%
31201017527.7781%10%22%28%13%12%17%
32201119445.2211%8%12%19%18%12%15%
33201217404.2-10%21%6%15%18%12%7%
34201318835.778%2%4%8%20%11%11%
35201422386.2719%5%18%8%15%13%9%
36201527957.4925%17%10%9%16%12%11%
37201625341.86-9%10%5%15%8%14%11%
38201729620.517%10%11%8%9%15%11%
39201832968.6811%6%12%8%8%17%11%
40201938672.9117%15%12%12%15514%12%
41202029468.49-24%01%7%5%11%9%
NO.OF NEGATIVE
YEARS
13612100
NO.OF POSITIVE YEARS28333633312722
PROBABILITITY TO
LOSE MONEY
32%15%3%6%3%00
MAX. NEGATIVE
RETURN
-47-15-5-2-200
MAX. POSITIVE
RETURN
267825343352722

Let us understand the important points that will be useful to us in the future.

#1. PROBABILITY TO LOSE MONEY

#1. PROBABILITY TO LOSE MONEY

KEY POINTS FROM THE GRAPH

  • If you invest for a short period like 1 year, your chances of losing money are very high. That’s about 31%
  • As the duration of the investment increases, the likelihood of losing money decreases.
  • As your investment lasts for more than 10 years, the probability of losing money in the market is 0%. That means you will always make money in the market.

#2. VOLATILITY

#2. VOLATILITY

volatility is the range of price change security experiences over a given period of time. If the price stays relatively stable, the security has low volatility.

Because people feel the pain of loss more intensely than the joy of gain, people are much more likely to sell with a loss.

KEY POINTS FROM THE TABLE

  • 1 year investment has the highest volatility from -47% to 267%.
  • As the duration of the investment increases, the volatility decreases.
  • Volatility is lowest in a 20-year investment period.

What is the best investment style for Low Risk and High Return?

#1.

If you want to invest in the short term, you should invest for at least 5 years.

#2.

If you have money to invest for the long term, you should always invest money for more than 10 years. Your capital will also be safe and you will get an inflation-beating return very easily.

SENSEX PERFORMANCE IN THE LAST 20 YEARS(2001-2020)

The Sensex has returned more than 15% (CAGR) in 41 years.

Has the Sensex given equal returns in the last 20 years?

For that, let us check the data of Sensex performance over the last 20 years.

SENSEX PERFORMANCE IN THE LAST 20 YEARS

YEARSENSEX HISTORICAL
DATA(2001-2020)
1-YEAR RETURN
20013604.38-28%
20023469.35-4%
20033048.72-12%
20045590.683%
20056492.8216%
200611279.9674%
200713072.116%
200815644.4420%
20099708.5-38%
201017527.7781%
201119445.2211%
201217404.2-10%
201318835.778%
201422386.2719%
201527957.4925%
201625341.86-9%
201729620.517%
201832968.6811%
201938672.9117%
202029468.49-24%

In 2001,sensesx was at 3604.48 and in 2020 it was 29,468.49

In the CAGR term, Sensex returns 11.08% over the last 20 years. It is true that the return of the Sensex in the last 20 years is much less than its historical return. but, it has easily outperformed inflation by a huge margin.

FINAL WORDS

  • Our stock market is very unique and dynamic in nature.
  • Sensex has returned about 15% CAGR in the last 41 years.
  • Historical data from the Sensex performance shows that it is very volatile in the short term. But as the investment time increases it is very stable and gives a high return.
  • It also shows that the chances of losing money in the short term are the highest at 31%. But if you invest in the stock market for more than 10 years, the probability of losing money is 0%
  • The best investment strategy for high returns and low risk is to invest for more than 10 years.

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