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BSE Sensex almost flat since 2010
Aug 26, 2013


If you take a look at the chart below, you will see that the Indian stock markets have really not delivered anything over the past 3 years. The BSE-Sensex has given a mere 5% returns since the beginning of January 2010 till date.

And if you look at the volatility that we have seen in recent times, you must be asking these questions - "Should I just sell my stocks and run away from the stock markets?" Or, "Should I simply invest in fixed deposits and bonds?"

Our founder, Ajit Dayal, has addressed these important questions, among many others, in our recently held web summit. He says that an investor needs to have stocks in his portfolio. The debt instruments like fixed deposits have given better returns as compared to the stock markets if one looks at the past 3 years. However, these returns have been insufficient to compensate for the increased cost of living or inflation. Unlike stocks, debt does not have the capacity to ever compensate for the increased cost of living. For this you need equities or stocks and hold them for a long period of time. And the stocks you need to buy are of those companies that have good managements, strong fundamentals and that have built this strength without taking on too much debt.

For those scoffing at the idea of holding stocks given that the markets have not really gone anywhere over the past 3 years, there is something that they need to remember. Not all asset classes deliver the same returns year after year every year. This is why Mr Dayal has emphasized on the need for asset allocation. Investors need to hold a bunch of asset classes that include equities, debt, gold, etc. So that if one asset class performs badly, then the returns from the other asset classes can help safeguard your wealth.

For the apathy towards the stock markets, Mr Dayal has blamed the regulatory system in the country. The thing is that Indians have an innate tendency to save. As a result the quantum of savings in India is huge. But a very miniscule percentage of these holdings find their way into the stock markets. The reason - people are simply scared of investing money in the stocks. Why? This is all thanks to the multitude of scams and issues that have hurt stock markets in the past. The spate of failed IPOs has not helped either.

Unfortunately the regulators, including SEBI, have done little to allay investor fears. If they can come up with a stronger regulatory system that actually works, then domestic investors would start investing in the markets.

And when that happens, India would no longer need to rely on FII flows for providing the boost to stocks. Neither would we have to start panicking when people like Bernanke announce that they would be shutting down their printing presses.

Do you agree with Ajit Dayal's views on the Indian share markets?

Source: BSE

This Chart Of The Day was published in The 5 Minute WrapUp - Should you run away from the stock markets?

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3 Responses to "BSE Sensex almost flat since 2010"

anil kothari

Sep 1, 2013

What is meant by long term cannot be defined Investors have been patiently waiting from last six years in various mutual funds or stocks.Even people in SIP and ULIPs have lost good amount in long term of 5-7 years

Like (1)

anil kothari

Sep 1, 2013

What is meant by long term cannot be defined Investors have been patiently waiting from last six years in various mutual funds or stocks.Even people in SIP and ULIPs have lost good amount in long term of 5-7 years

Like (1)

Amit Jain

Aug 27, 2013

Quite clearly, he too is bearish. What he probably meant is Equities will give good returns, but in the very long term.

It would be interesting to get a specific number from Mr.Dayal on what percentage of ones savings should be kept invested in Equities for a particular age group.

Like (1)
  
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