SENSEX has been one of the best performing stock indices in the world, ever since it was founded in 1979. Over the period of 39 years, the CAGR produced by SENSEX is 16.21%. However, this is not all. The SENSEX stocks have been regularly declaring dividends. According to an estimate, average annual dividend distributed by Sensex stocks has been around 2.17%.  Therefore, actual long term average CAGR should be 18.38%. By this logic, real level of Sensex should be much more than current level. A simple calculation in excel throws the number at 70,000. Amazingly, this is just the double of current level, i.e. 35000 approx.

This amazing performance has been delivered despite several phases of greed and fear. There have been political upheavals, scams, terrorist attacks, natural disasters or economic depressions. The stock markets have always reeled under threats. But they have delivered to everyone who exhibited patience in buying or selling the investments.

Investing in Stock Markets is not for a quick gain. For that, Casinos will suit better.  Like casinos, markets too can be risky. Over last 39 years, there have been 3 instances when investors lost more than 40% of their wealth in 1 year itself. However, if you are a long term investor, the market will reward you for sure. It has delivered every decade.

Just sample this:

Decade                            Sensex                                     Growth Factor
1979 to 1989                   from 100 to 713                      Sensex became 7.13X
1989 to 1999                   from 713 to 4140                    Sensex became 5.80X
2000 to 2010                  from 4140 to 20069                Sensex became 4.85X
2010 to 2020                  from 20,069 to ????               Anybody’s guess! But the catchup is big.

Since 2010, Sensex has just been up by 1.75 times. The corporate earnings are yet to come. There has been a virtual draught for last 4 years on the corporate earnings front. Looks like, over next couple of years, there will be bumper harvest by the corporates.

2018 can be volatile. But it will be dangerous to time the market to perfection. The first week of February showed us a trailer of how volatile the markets can be. There is more in the offing. But, as long term investors, you shouldn’t worry too much. Stick to your financial plan and allocate assets accordingly.

I request you to go through the video “Journey of Money” embedded below. I am sure you would love the contents.

If you don’t have a long term FINANCIAL PLAN or your ESTATE PLAN in place till now, what on earth are you thinking? The cost of delay is high. Revert to this email with your query. We will be glad to help you with our research and advise.


By Sameer Rastogi

18 years of experience, PG in Finance and has delivered Wealth Management lectures at IIM Lucknow, IBS Gurgaon and IIPM Delhi. Contributed to various newspapers. Strength – Application of Economic fundamentals to Investment

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