Indian equities have been offering lucrative growth potential to investors, with significant returns observed over the years. In this article, we will delve into the data provided by Funds India Research, which outlines the growth trajectory of Indian equities, particularly in mutual funds. The insights gained from this data shed light on the potential returns and the timeframe required for such growth.
The data, sourced from Aditya Kondawar’s Twitter feed, shows the multiplication factor of Indian equities over various time periods, ranging from five to fifteen years. This data, collected since 1999, spans a time frame of 24 years and offers valuable insights into the growth potential of Indian equities. It is pertinent to note that the focus of this analysis is on Nifty total returns, which includes dividends, and not on specific funds.
According to the data, Indian equities have demonstrated a consistent growth pattern. On average, 80% of the time, equities have doubled in value within six to seven years. This highlights the potential for substantial returns within a relatively short period. Furthermore, approximately 80% of the time, equities have tripled in value within ten to eleven years, and four times within twelve to thirteen years.
These figures indicate the growth potential available in the market. Nevertheless, it is essential to acknowledge that past performance does not guarantee future results. However, the historical data does provide a general idea of the possibilities within the Indian equity market.
The statistics also reveal the worst-case scenario for investors. Even in the worst situations, Indian equities have doubled in value within eleven years, tripled in fourteen years, and quadrupled in fifteen years, 100% of the time. This demonstrates the resilience of the market and indicates that given enough time, even investors who enter during a downturn can experience positive returns.
Taking a closer look at the timeframe required for non-negative returns in weakened investing strategies, we see that the numbers are even more promising. While Nifty shows no chance of negative returns in five years or longer, the data suggests that weakened investing strategies have outperformed Nifty consistently over the last seven years.
In fact, many weakened investing strategies have beaten Nifty by a considerable margin. Consequently, the period required for a non-negative return is significantly lower in these strategies compared to the Nifty total returns index.
This information serves as a crucial reminder for investors who are considering investing in weakened investing strategies. Having a runway or glide path of four to five years is highly recommended. This time frame allows investors to weather any potential downswings in the market. Even if investors enter the market during a challenging period, such as the start of a downward trend, they can still benefit from the growth potential of Indian equities over the long term.
We made a 2 part series couple of years ago but this study may be helpful in extending your insights on this subject,
By having a longer time horizon, investors can ride out market fluctuations and capitalise on the inherent growth potential of Indian equities. It’s worth noting that gradually deploying capital over time, rather than investing a lump sum at the market’s worst point, can enhance returns and minimise risk.
A prime example of the benefits of a longer investment horizon can be observed by examining the market’s performance during challenging times. Suppose an investor entered the market on January 1, 2008, just before the global financial crisis, or on January 1, 2020, right before the onset of the COVID-19 pandemic. By considering a four- to five-year time frame, even in those adverse scenarios, the market has shown remarkable growth. Nifty has surged from 12,000 to 22,000 within this period, while specific strategies have delivered even greater returns, multiplying 2x to 3.5x.
