 "BSE Sensex")
The BSE Sensex has been one of the top-performing areas of investment in the past 40 years, consistently delivering double-digit returns in rupee terms, beating assets such as global equities, precious metals, and fixed income.
There is no comparable data for the real estate and housing market but it’s highly plausible that it has outperformed real estate too.
Sensex tops in local currency
India’s benchmark equity index has delivered annualised returns of 13.6 per cent to long-term investors since December 1986, outperforming the United States Dow Jones Industrial Average, which has appreciated at a compound annual growth rate (CAGR) of 9 per cent during the period. The Sensex has also outperformed the United Kingdom’s equity benchmark FTSE100 and Hong Kong’s Hang Seng, which have appreciated at a CAGR of 4.9 per cent and 7 per cent, respectively, in their local currencies during the period.
The Sensex outperforming the Hang Seng suggests better returns for Indian equity investors than their Chinese peers. The Hang Seng includes a significant number of Chinese companies. Some of them are Tencent Holdings, Alibaba Group, Industrial & Commercial Bank of China, China Construction Bank, China Mobile, BYD Company, Xiaomi Corp, and China National Offshore Oil Corporation. This makes the Hang Seng the barometer of the Chinese equity market, besides the Hong Kong market.
The Sensex is up more than 160 times in the past 40 years — from 527.4 at the end of December 1985 to 85,712 now. In the same period, the Dow Jones Industrial Average is up 31 times from 1,546.7 to 47,851 now. For comparison, the FTSE 100 is up around seven times in the period and the Hang Seng around 15 times in the past 10 years.
The year 1991 has been the best year for equity investors in India. The Sensex rallied 82.1 per cent that year, rising from 1,048.3 at the end of December 1990 to close at 1,908.9 at the end of December 1991. The chart-bursting rally in 1991 was part of the best ever bull run in Indian equities, which started in early 1988 and continued till the end of 1994. During these seven years, the Sensex jumped nearly nine times from 442 at the end of December 1988 to close to 3,926.9 at the end of December 1994. This translated into annualised returns of 36.6 per cent during the period.
The next big bull run was during 2001-07. In these six years, the Sensex jumped 6.2 times from 3,262 at the end of December 2001 to close at 20,287 at the end of December 2007. This translated into a CAGR of 35.6 per cent. For comparison, the index is up 3.3 times in the past 10 years, or 228.2 per cent, appreciating at an annualised rate of 12.6 per cent since the end of December 2015.
Ten years of winning streak
In the past 40 years, the Sensex has given negative returns only in nine calendar years, the last being 2015, when it declined by 5 per cent. At its current pace, it is likely to end in the green for the 10th consecutive year this year, its longest winning streak ever. This beats the seven consecutive years of a positive close between 1987 and 1994. The index is up 9.7 per cent year-to-date in 2025, slightly ahead of 8.2 per cent returns delivered in 2024.
Fixed income far behind the Sensex
The Sensex has beaten fixed-income instruments such as Government of India bonds by a big margin. In the past four years, Government of India bonds of various tenures have given weighted annual returns or yields of 9.1 per cent on average, nearly 450 basis points lower than the annualised returns delivered by the Sensex during the period, according to the data from the Reserve Bank of India (RBI). In fact, ₹100 invested in a portfolio of Government of India bonds in 1985 would have grown to ₹3,266 now if the investor had stayed invested. Instead, if the investor had invested ₹100 in a portfolio of stocks that mirrored the Sensex in 1985 and stayed invested, the corpus would have grown to ₹16,252 by now.
Precious metals yet to catch up with Sensex
The Sensex has also been ahead of precious metals such as gold and silver, which have set the charts on fire in recent years. However, in the longer term, the index has appreciated at a faster pace than both gold and silver.
In the past 40 years, the spot price of gold has appreciated at a CAGR of 12.1 per cent, nearly 150 basis points lower than annualised appreciation in the Sensex in the period. (One basis point is one-hundredth of 1 per cent.) Gold in the international spot market, when converted into rupees, has appreciated from ₹3,954.3 per troy ounce in December 1985 to ₹3,81,037.5 now. (One troy ounce is equivalent to 31.1035 gm.)
Similarly, silver has appreciated at an annualised rate of 11.4 per cent in the past 40 years, underperforming the Sensex by 220 basis points during the period. The silver price in the international spot market is up from ₹70.2 per troy ounce in December 1985 to ₹5,241.9 now.
To put it differently, ₹100 invested in gold in 1985 would have appreciated to ₹9,336 now and ₹100 in silver would have risen to ₹7,469.
Rupee depreciation weighs on dollar returns
However, the Sensex has lagged behind the US Dow Jones Industrial Average in terms of returns in constant currency. A steady depreciation in the rupee against the dollar has lowered the returns offered by the rupee in dollar terms. The Indian currency has depreciated at a CAGR of 4.9 per cent since 1985, reducing dollar returns by a similar margin during the period. The rupee’s exchange rate against the dollar has declined from 12.1 at the end of December 1985 to around 90 now.
As a result, the BSE Sensex has appreciated at a CAGR of 8 per cent in dollar terms in the past 40 years. The index value has risen from $43.3 at the end of December 1985 to around $945 now. In comparison, the Dow Jones is up a little over 31 times during the period, translating into annualised returns of 9 per cent.
The Dow Jones is trading at 48,000, up from 1,556.7 at the end of December 1985. For comparison, the Hong Kong’s Hang Seng index has given CAGR returns of 7 per cent in the past 40 years in dollar terms while the FTSE100 has yielded 4.7 per cent annualised returns in constant currency terms since 1985.
