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Historical Bear Market Returns in India

October 21, 2008

We are presenting to you the historical returns in India after a Bear market. This is the First Part of the three part post. Part-II will cover the concerns and how they can be mitigated. Part-III will cover Fundamentals and Outlook. Read Every Word of this Article Carefully. Sensex has corrected by 50% in the last 9 months which augurs well from wealth creation point of view. At current levels it is trading at a historical low on one year forward P/E basis. Investments in equity with long term perspective at current levels will help generate good returns. Things can only go better from here as currently global investors are underweight on both equity as well India as an asset class.

The following tables data shows historical returns since 1990 delivered by the Indian stock markets after every major crash or a bear phase. The longest period for the index to recover to the 16x multiple was in Nov 95 after a period of 45 months since the peak of 52x in Apr 92.

Historical Returns in Indian Stocks after a Bear market
As witnessed in the past, Indian investors have created enormous wealth after any major fall in Sensex. Markets during such times have given above normal returns as compared to historical returns.

We will post about the Concerns around us in the global crisis and how they are mitigated. Questions / Critics are Welcome.

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