A Rs 1 lakh investment in sensex in 1979 would have risen to Rs 3.9 crore today

April 2, 2019

On Monday, as the sensex topped 39,000 for the first time ever, it also quietly crossed another landmark. It was exactly 40 years ago, on April 1, 1979, that the sensex was technically born, starting its journey with a base value of 100 points. In effect, in 40 years, the sensex has risen 390 times. Seen another way, if one had invested Rs 1 lakh in the index on that day, the investment would have been worth Rs 3.9 crore today.

The BSE started publishing the value of the sensex only from 1985 when it was in the 400-point range. The same year it gave the highest annual returns, 94%, while in 2008 it had more than halved, from over 20,000 to a little over 9,600.

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On Monday, boosted by strong global cues, the sensex opened nearly 200 points higher at 38,859, scaled a new all-time peak at 39,116 and closed at 38,872, up 199 points on the day. The tremendous returns generated by the sensex is a testimony to the power of wealth creation of the stock market, provided the investor is able to withstand the ups and downs that the market throws up once in a while. "People who get scared by volatility and do not stay the journey do not benefit from (the power of) compounding," said Rajeev Thakkar, fund manager, Parag Parikh Long Term Equity Fund.

Also, for investors, it is not advisable to look at stock prices frequently, he said. Over the last 40 years, India has been witness to the assassination of one Prime Minister and one ex-PM, testing of nuclear bombs, two major stock market scams, a war and several major border skirmishes with Pakistan, terror attacks like 9/11 and 26/11, pledging of golds to avoid sovereign debt default and fall of governments at the Centre. Yet, for the index over these 40 years, the average annual return was a little over 16%. In comparison, according to some estimates, bank FDs of one-year duration would have given annual average returns of about 7% while the returns from gold would have been in the 9% range.

According to Gajendra Kothari, MD & CEO, Etica Wealth Management, a financial advisory firm, the sensex's returns over these four decades clearly demonstrates the magnitude of wealth created in the Indian stock market during these years. "Had a retail investor who didn't know anything about selecting stocks and had no experience of tracking his investments invested in the index, he would have multiplied his wealth several hundred times," he said.

"For any investor, the sensex remains the ideal way to make money. By investing in this index, he participates in the India growth story by having an exposure to 30 best companies in the country," Kothari said.