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How did the Indian stock market perform in 2021?

Posted on 04 Jan 2022
Author: Sayan Sircar

Tags: Market Movements

4 mins read
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This article shows the report card for the Indian stock market for 2021 vs the last 25 years.

How did the Indian stock market perform in 2021?

This article is a part of our detailed article series on the yearly stock market performance in India. Ensure you have read the other parts here:

How well did the Indian stock market perform in 2023?

This article shows the report card for the Indian stock market for 2023 vs the last 25 years.

How did the Indian stock market perform in 2022?

This article shows the report card for the Indian stock market for 2022 vs the last 25 years.

📚 Topics covered:

Indian stock market has overall made money
Looking back at 2021
25y report card of SENSEX and Nifty 50
Monthly returns over the last 25 years
Takeaways for investors

Indian stock market has overall made money

Year-wise SENSEX return distribution since 1996

But there has been a lot of fluctuation over the years.

Looking back at 2021

25y-report card of SENSEX: 2021 is the 10th best year

2021 was a standard year in which stock markets overall rose in India. If we look at the last 25 years, since 1996, the Sensex and Nifty 50 have given positive returns 19 times. 2021 returns were the 10th highest positive return in these 25 years.

This article uses the SENSEX Total Returns Index and the Nifty 50 price index to show a report card for the Indian stock markets.

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25y report card of SENSEX and Nifty 50

25-year report card of Sensex and Nifty 50 until 2021

Note: The Nifty 50 has not regularly underperformed the SENSEX. The Nifty 50 data in the chart uses the price returns, while the SENSEX data includes price returns and reinvested dividends.

Monthly returns over the last 25 years

Monthly returns of SENSEX over the last 25 years ending 2021

The average return of the SENSEX with reinvested dividends is 19% over these 25 years. So ₹1 lakh invested in the beginning would have become ₹27 lakhs today. But that journey was not smooth, with a 52% drop in 2008 due to the global financial crisis and more minor falls along the way.

Takeaways for investors

Investors should be prepared for both rises and falls along the way when investing in equity. This concept is called the sequence of returns. The unpredictability of this sequence causes sequence of return risk that we have discussed here: How does sequence of return risk affect your goals?.

In the Indian equity market, there is limited evidence of flat stock market returns over long periods, like a decade. Hence, investors, especially new ones, will face a test of conviction in equity investing if such a situation arises.

In the Arthgyaan goal-based investing framework, we assume a positive premium over inflation for equity and zero real returns for an investor’s lifetime retirement portfolio: How much returns should you expect from your retirement portfolio?.

Investors must create their investment plan without worrying about such fluctuations in the equity markets since they would be safe by implementing risk management by reducing their allocation to equity as their goal comes closer: Your portfolio needs a glide path: what, why and how?.

We have evidence here that goal-based investing works for long-term goals in India: Goal-based investing: does it work in India? which you can implement for yourself using the Arthgyaan goal-based investing tool.

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