42 year return of Sensex and S&P 500 (INR) is the same!

Published: May 18, 2021 at 9:53 am

In this article, we compare the returns of the Sensex Total Returns Index with the S&P 500 Total Returns Index in INR since the inception date of the Sensex, 1st April 1979. The analysis stems from a comment on our YouTube channel that said the S&P 500 would have easily beat the Sensex over the last decades. Let us find out.

Before we begin, we urge the reader to appreciate that this study is purely based on intrigue and curiosity. It is not meant to used as investment advice. Kindly do not base your asset allocations based on recent returns. What seemed like a straightforward exercise – get data of both indices and the exchange rate and plot – turned into a useful history lesson.

While the Sensex price data is available from April 3 1979, the total returns data is only available from 19th Aug 1996. So the rolling returns comparison shown below is only from this date. The S&P 500 has got three different base dates.

The one starting from Jan 1998 has dividends reinvested daily and is available from Yahoo Finance. For historical reasons, data is available with base dates of 1970 (dividend reinvested monthly) and 1936 (dividends reinvested quarterly). The 1970 data was obtained from the internet web archive. Prof. Rober Schiller has inflation-adjusted monthly S&P 500 data available from 1871!

42-year returns of Sensex and S&P 500 (INR)

First, let us get the titular trivia out of the way. On 1st April 1979, the Sensex was set to be 100 (both price and total returns are the same on this date). After 42 years, on 14th May 2021, the Sensex TRI was 72125. An annualised return (CAGR) of 16.90%.


The USD was worth Rs. 8.08 on 1st April 1979 (data from gold.org). On 14th May 2021, it was Rs. 73.29. An annualised return of 5.37%. The S&P 500 TRI (in USD) increased from 101.76 to 8669.49 during this period. An annualised return of 11.12%.

The annualised return of the S&P 500 TR (in INR) during this period is given by

(1+ 11.12%) x (1+5.37%) -1 = 17.09%. Which is pretty much the same as the Sensex return. Of course, this data is as of May 14th 2021 and will change every day but is surprising enough.

Now let us compare the two indices from 19th Aug 1996. All index data is total returns.  Shown below are the Sensex and S&P 500 (USD) in log scale and normalised to this date. The USD-INR exchange rate is shown on the right axis.

Sensex(INR) and S&P 500 (USD) (log scale, normalised) vs USD-INR Exchange rate (right axis)
Sensex(INR) and S&P 500 (USD) (log scale, normalised) vs USD-INR Exchange rate (right axis)

Notice how the exchange rate has acted as a hedge during the 2000, 2008 and 2020 market downturns. If we plot the S&P 500 in INR, you can how much the exchange rate matters to the comparison.

Sensex(INR) and S&P 500 (INR) (log scale, normalised) vs USD-INR Exchange rate (right axis)
Sensex(INR) and S&P 500 (INR) (log scale, normalised) vs USD-INR Exchange rate (right axis)

If we remove the log scale, we can appreciate the lesser volatility of the S&P 500 INR due to currency hedging.

Sensex(INR) and S&P 500 (INR) (normalised) vs USD-INR Exchange rate (right axis)
Sensex(INR) and S&P 500 (INR) (normalised) vs USD-INR Exchange rate (right axis)

Even visually we can appreciate the returns over the last 25 years (Aug 1996 to May 2021) are nearly the same for the two indices. The Sensex CAGR is 13.3% and the S&P 500 INR CAGR is  12.9% (S&P 500 USD CAGR is 9.74% and USD-INR CAGR is 2.96%).

Now let us look at rolling returns. The number of return data points is mentioned in the box within the plot area.

Five years 

5 year rolling returns of S and P 500 Total Return in INR vs Sensex Total Return in INR
5-year rolling returns of S and P 500 Total Return in INR vs Sensex Total Return in INR

Ten years

10 year rolling returns of S and P 500 Total Return in INR vs Sensex Total Return in INR
10-year rolling returns of S and P 500 Total Return in INR vs Sensex Total Return in INR

15 years

15 year rolling returns of S and P 500 Total Return in INR vs Sensex Total Return in INR
15-year rolling returns of S and P 500 Total Return in INR vs Sensex Total Return in INR

20 years

20 year rolling returns of S and P 500 Total Return in INR vs Sensex Total Return in INR
20 year rolling returns of S and P 500 Total Return in INR vs Sensex Total Return in INR

It is incorrect to assume from these graphs that the Sensex “was better” over 20 years. The drop in 10 or 15 year Sensex returns over the last five or six years is significant. I do not have the expertise to dig deep into both markets to look for reasons.

There is one glaring statistic though. The top ten Nifty companies today were also part of the Nifty 20 years ago and some part of the top ten. In the US, four of the top ten S&P 500 companies (March 31st 2021) were not even listed 20 years ago. The differences in the standards of innovation, entrepreneurship and the ease of setting up companies are easy enough to perceive without this data.

Yes, the gains from the S&P 500 are not from within the US alone. Several companies have a truly international presence including in India. However, if we are to thump our chests about the “India growth story” the established companies have to invest a lot more in research and innovation.

What does this mean for the investor? The S&P 500 INR has done well but will not always beat Sensex. So one should not do the mistake of relying on recent performance to fix portfolio weights. Many young earners today want a slice of the Nasdaq or the S&P 500 returns. There is nothing wrong with this but “diversification” cuts both ways (the tide could turn) and comes with portfolio management responsibilities (rebalancing, tracking error, taxation).

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