India: Analysis Of SENSEX Returns In Last 43 Years

SENSEX is the amalgamation of two words- Sensitive Index. India’s oldest index SENSEX was first published in 1886 based on the Market Capitalization-Weighted method of 30 financially sound companies across various sectors listed on the Bombay Stock Exchange (BSE). On 1 April 1979, 1978-79 was considered as the base year and the base value was 100. Since 1 September 2003, S&P BSE SENSEX has been computed using free-float market capitalization methodology.

S&P BSE SENSEX, the benchmark index of the Bombay Stock Exchange (BSE) is the most-watched stock index in India. In this article, we will have a look at the analysis of the last 43 years of SENSEX data in India. The data credit goes to 100xgain.

Brief Overview Of SENSEX

Here is the brief overview of 43 year’s SENSEX data as analyzed by Ofbusiness:

Positive And Negative Occurrences- Over the last 43 years, there were around 11,000 trading days. During these days, these were the returns delivered by SENSEX:

• Daily- Positive returns 53% of the time and negative returns 47% of the time.
• 𝗪𝗲𝗲𝗸𝗹𝘆 – Positive returns 56% of the time and negative returns 44% of the time.
• 𝗠𝗼𝗻𝘁𝗵𝗹𝘆- Positive returns 61% of the time and negative returns 39 % of the time.
• 𝗤𝘂𝗮𝗿𝘁𝗲𝗿𝗹𝘆- Positive returns 64% of the time and negative returns 36% of the time.
• 𝗬𝗲𝗮𝗿𝗹𝘆- Positive returns 72% of the time and negative returns 28% of the time.
• 3 Yearly- Positive returns 89% of the time and negative returns 11% of the time.
• 𝟱 𝗬𝗲𝗮𝗿𝗹𝘆- Positive returns 96% of the time and negative returns 4% of the time.
• 𝟭𝟬 𝗬𝗲𝗮𝗿𝗹𝘆- Positive returns 100% of the time and negative returns 0% of the time.

The percentage of positive returns increased significantly as the time horizon expanded. For example, if we look at the last 5 years’ data, SENSEX delivered positive returns 96% of the time and negative returns only 4% of the time.

Sensex Returns- SENSEX’s CAGR over the last 43 years is 15.5%. It has also shown a decent dispersion of returns over the years with the CAGR ranging from 8.8%-24.8% during different periods. Adding an average dividend yield of 1.4% over the last 43 years, the compounded return of SENSEX was around 16.9%. At this rate, the value of SENSEX is around 80,000 levels.

Decadal Returns Dispersion (CAGR)– Mentioned below are the decadal returns dispersion details:

• From 1980 to 1990 – 21.6%
• From 1990 to 2000 – 14.3%
• From 2000 to 2010 – 17.8%
• From 2010 to 2020 – 8.8%
• From 2020 to 2022 – 24.8%

Highly Rewarding Performance– The performance of actively managed equity funds has been highly rewarding. Here is the data:

20 Years‘ Categorywise Returns (CAGR)

• 𝗛𝘆𝗯𝗿𝗶𝗱 𝗙𝘂𝗻𝗱𝘀- 15.96%
• 𝗗𝗶𝘃𝗲𝗿𝘀𝗶𝗳𝗶𝗲𝗱 𝗙𝘂𝗻𝗱𝘀-16.25%
• 𝗘𝗟𝗦𝗦 𝗙𝘂𝗻𝗱𝘀- 18.20%
• 𝗔𝗹𝗹 𝗙𝘂𝗻𝗱𝘀- 16.41%**

** Excluding LIC and a few AMCs

Longest Period Without Returns- The longest period without any returns was from 1994 to 2003, a total of 9 years.

No 7 Years Rolling Returns- In the last 18 years since 2002, not a single 7-year rolling return was in loss. Simply put, if you ever invested since 2002 and kept your money invested for a minimum duration of 7 years then you would have never lost any money. That’s quite impressive. Isn’t it?

OFB’s Insight

In June 1996, SENSEX was at 3800. Despite some periods of negative returns, the performance of SENSEX has been quite impressive over the last 43 years. In addition, the performance of actively managed equity funds has been even better. While there have been periods of low or no returns, the long-term potential of equity investments in India remains strong.