44-year Sensex return is 17%, but half of that came from just four years!

Published: April 8, 2023 at 6:00 am

It is widely recognized that stock market returns tend to be clustered, with significant gains followed by years of disappointment. In this article, we examine the yearly and monthly returns of the Sensex from April 1979 and demonstrate that the annualized return after 44 years is primarily determined by just a handful of successful years/months.

All the returns mentioned in this article are price returns. Over the last 44 years, dividend income would be significant and approximately 2% to 2.5% above the price return. However, the absence of total returns will not dilute the central result in any way.

On 3rd April 1979, the Sensex price was 124.15 (this is by back-calculation, actual trading began only in 1986). On 1st April 2023, after 44 years, the Sensex price closed at 58991.52. This represents an annualized return (CAGR) of 15%. Including about 2% dividend return, the fine return is about 17%.

Using yearly returns, we can break down the returns from April 1979 to April 2023. For instance, the return from April 1979 to April 1980 is 3.5%. The return from April 1980 to April 1981 is 35.25%, and so on. The complete list of these returns is provided below.

Date  Annual return
01-04-1980  3.50%
01-04-1981  35.25%
01-04-1982  27.12%
02-04-1983  -3.76%
03-04-1984  16.06%
01-04-1985  42.39%
01-04-1986  59.57%
01-04-1987  -8.95%
04-04-1988  -22.21%
03-04-1989  82.26%
02-04-1990  8.16%
01-04-1991  52.45%
02-04-1992  267.61%
02-04-1993  -47.32%
04-04-1994  63.57%
03-04-1995  -12.28%
02-04-1996  2.81%
01-04-1997  0.51%
01-04-1998 15.83%
01-04-1999 -7.14%
03-04-2000 37.07%
02-04-2001 -29.42%
01-04-2002 -1.85%
01-04-2003 -11.98%
01-04-2004  86.33%
01-04-2005  15.05%
03-04-2006  75.08%
02-04-2007  7.70%
01-04-2008  25.46%
01-04-2009  -36.63%
01-04-2010  78.68%
01-04-2011  9.77%
02-04-2012  -10.00%
01-04-2013  7.93%
01-04-2014  18.99%
01-04-2015  25.90%
01-04-2016  -10.58%
03-04-2017  18.36%
02-04-2018  11.18%
01-04-2019  16.89%
01-04-2020  -27.29%
01-04-2021 77%
01-04-2022 18%
01-04-2023 -0.48%

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

The top six (75% plus) annual returns are

  • 267.6% Harshad Mehta Scam (April 92)
  • 86.3% 2000s bull run (April 2004)
  • 82.3%  (?) (April 1989 recovery after a 22% fall the previous year)
  • 78.7% April 2010 (financial crisis recovery)
  • 77% April 2021 (recovery after covid outbreak crash)
  • 75.1% 2000s bull run (April 2006)

Of these, 82.3%, 86.3%, 77% and 78.7% were “recoveries”. The preceding periods saw significant losses. If an investor had run away from the market after these losses, they would have missed these “big returns”. A -47.32% return followed the 267.6% return! This is known as volatility clustering (big returns and big falls occur together). Read more about it: Timing the market will work but not how we imagined!

Let us set each return to zero to see how much these returns influence the 44-year CAGR of 17%. Of course, this is unnatural and impossible. This is done only to establish a simple point: (in the absence of a scam!) If we want the rainbow, we must put up with the rain.

Remove the 267.6% gain from the Harshad Mehta scam, and the CAGR (excluding dividends) would drop from 15% to 11.7%. This is disillusioning, to say the least. All these gains we dream of by looking at past performance stem largely from a scam.

Please note that a 2% dividend return is unlikely in 1992 since the Sensex was not a large cap index relative to its market capitalization today. So the dividend yield would be much smaller.

Remove the top two returns, and the 44Y (price) CAGR becomes 10.11%. Remove the top four; it becomes 7.20%; Thus, the four big up moves, out of which the biggest was fraudulent, account for more than half of the CAGR we compute today and dream about. Remove the five top moves; the 44Y CAGR is 5.8%

What do these results mean? Though these results are unrealistic, they are disturbing. But that is the nature of the market (scams included). Big returns either precede or succeed big losses. Those who want the big returns “over the long term” will have to stick around to face both the losses and gains.

Overall returns will depend on one or two big up moves. When this occurs, the investor must not only be invested but also be invested big. Post that, they should rebalance their portfolios to lock the gains in safe assets. If they leave the invested value to the mercy of the stock market, then the final result could be disappointing.

This is why we keep saying everyone is timing the market. Why “time in the market” is not different from “timing the market”! Just the mutual fund industry wants us to time the market by being in the market earning notional gains or losses while they pocket real returns via fees and commissions. Be that as it may, for most of us, equity investing (via mutual funds or otherwise) is essential to achieve our goals.

Staying investing in the market is crucial for gains, but overstaying our welcome could be a case of “caramba! Back to square one!”. This is the simple secret behind equity investing. So invest systematically but do so with a plan.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)