Sensex Rolling Retuns - Some observations

I was doing some data analysis on Sensex data from BSE. I have taken the Sensex value for March end (or very close to it) for every year since Sensex was constituted in 1979. It put my mind to rest on the need to keep focussed on the long term and ignore short term market gyrations.

Some interesting observations:-

1. The worst crash in Sensex came not in 2008 but in 1993 courtesy Harshad Mehta. Down 45% in 1993 vs 35% in 2009.
2. The highest return for a year has been 252% in 1992!!! Again, courtesy Harshad bhai. The man giveth and he taketh away!!!
3. So, between 1992 & 1993, investors actually did not lose a lot money if they had stayed invested. Sensex was down 10% over the 2 year period, not a catastrophe.
4. Negative returns for over rolling 5 years starts to become lower and lower and by 12 years, it becomes zero. i.e, there has been no case historically, where an investor has lost money by being invested for 12 years or more.
5. For a period of 3 years or more, the median return is relatively good - 14% or more.

Summary of Observations
		Returns (%)
Date	Sensex	1 Year	3 Years	5 Years	7 Years	10 Years	12 Years	15 Years
Apr-79	124
Apr-80	129	3.92
Apr-81	173	34.47
Apr-82	221	27.34	21.18
Apr-83	213	-3.76	18.12
Apr-84	247	16.06	12.46	14.73
Apr-85	353	43.05	16.91	22.30
Apr-86	582	64.91	39.90	27.40	24.70
Apr-87	524	-9.92	28.56	18.87	22.18
Mar-88	398	-24.03	4.11	13.38	12.61
Apr-89	724	81.71	7.53	24.01	18.48	19.28
Apr-90	783	8.16	14.30	17.27	20.47	19.76
Apr-91	1203	53.63	44.54	15.62	25.39	21.37	20.83
Apr-92	4238	252.34	80.24	51.88	42.63	34.37	33.78
Apr-93	2311	-45.46	43.45	42.14	21.77	26.95	24.08
Mar-94	3779	63.49	46.46	39.17	32.60	31.37	26.70	25.57
Apr-95	3317	-12.23	-7.85	33.47	35.36	25.11	25.73	24.17
Apr-96	3418	3.04	13.92	23.23	24.82	19.36	24.49	21.98
Apr-97	3558	4.10	-1.99	-3.44	24.14	21.10	21.23	20.35
Apr-98	4072	14.46	7.08	11.99	19.03	26.17	17.60	21.75
Apr-99	3686	-9.47	2.55	-0.50	-1.97	17.68	17.65	19.75
Apr-00	5053	37.07	12.41	8.79	11.82	20.50	23.58	19.41
Apr-01	3605	-28.66	-3.98	1.07	-0.67	11.60	14.32	12.92
Apr-02	3463	-3.94	-2.06	-0.54	0.62	-2.00	13.19	13.41
Apr-03	3151	-9.00	-14.56	-5.00	-1.15	3.15	8.36	14.78
Apr-04	5788	83.68	17.10	9.44	7.20	4.36	2.63	14.87
Apr-05	6605	14.11	24.02	5.50	7.15	7.13	9.14	15.28
Apr-06	11564	75.08	54.25	26.25	17.74	12.96	9.77	16.29
Apr-07	12625	9.17	29.69	29.52	13.98	13.50	11.78	7.55
Apr-08	15833	25.41	33.83	38.11	23.54	14.54	13.63	13.69
Apr-09	10349	-34.64	-3.63	12.32	16.93	10.87	9.31	6.95
Apr-10	17693	70.96	11.91	21.78	27.95	13.35	13.02	11.81
Apr-11	19420	9.77	7.05	10.92	18.88	18.34	14.85	12.28
Apr-12	17597	-9.39	19.36	6.87	15.03	17.65	10.96	11.25
Mar-13	19570	11.21	3.42	4.33	7.81	20.04	15.14	11.03
Yearly Rolling Returns		34	32	30	28	25	23	20
Negative Returns		11	6	4	3	1	0	0
Summary since 03 Apr 1979
	1 Year	3 Years	5 Years	7 Years	10 Years	12 Years	15 Years
Yearly Rolling Return Observations	34	32	30	28	25	23	20
Negative Return Observations	11	6	4	3	1	0	0
Loss Probability (%)	32	19	13	11	4	NIL	NIL
Median Return (%)	10	14	15	19	18	15	15
Average Return (%)	24	18	17	17	17	17	16
Max Return (%)	252	80	52	43	34	34	26
Minimum Return (%)	-45	-15	-5	-2	-2	3	7
Standard Deviation (%)	53	20	14	11	9	7	5

Buy when there is blood on the streets

If I reflect back on the last 12-13 years that I have been investing, I see that I have made a significant amount of money when I have bought when there was the proverbial "blood on the streets". I had bought around 2002-03 before the bull market really started (that was more of good luck that a well laid out thought process in action). I again bought right through 2008. And I am buying now as well. I think the "CNBC public" get too swayed by what gets reported. A couple of months back, things were so rosy and now suddenly all mid cap and small caps are collapsing!!

I think it is a good time to look at deep value large caps, good solid mid caps and some adventurous small caps. I am buying small quantities of Unichem Lab, Finolex Cables, Deepak Nitrite, Kaveri Seeds & PI Industries.

Another suggestion - IGNORE ALL TV PROGRAMS ON THE BUDGET!! They add nothing to your investing knowledge or expertise and just create a large amount of noise in the system.

Disclosure: I am interested and invested in all the stocks mentioned in this post. Please due your own due diligence before investing.