Sensex Total Return Index scales peak 100,000. What next?

In the last 10 years, Sensex and Sensex TRI have delivered returns at a compounded average growth rate of 12.8 percent and 14.3 percent.

The Sensex has been hovering on record highs for the last few days. From around 1,000 points in 1990 to 67,000 points in 2023 - the journey of the benchmark index has been full of twists and turns. But, there is an undeniable truth: it has created immense wealth for investors.

Behind all the cacophony over the charging bulls and the raging markets, one index which fund managers use to assess their performance, has quietly shot past 100,000 mark. Sensex TRI or the Sensex Total Return Index was formed assuming that all dividends paid by constituent companies are reinvested into the index itself.

Most of the growth for both the Sensex and the Senssex TRI has come in the last five-six years. Whereas Sensex has doubled from its level in October 2017, Sensex TRI has doubled from the level in January 2018.

In the last 10 years, Sensex and Sensex TRI have delivered returns at a compounded average growth rate of 12.8 percent and 14.3 percent. For a 20-year period, this stood at 15.5 percent and 17.2 percent, data provided by Geojit Financial Services showed. Since inception in 1986, Sensex has delivered returns at 13.6 percent CAGR.

It means, in terms of investment growth, Rs 1 lakh invested in June 2003 would be worth around Rs 24 lakh as of June 2023 in TRI terms and around Rs 18 lakh as per price return index, or simply Sensex.

Such astonishing returns is what makes the case for index funds for retail investors as they reinvest their dividends.

“India is today looked upon as a bright spot among the major world economies bringing record foreign flows to equities, which helped markets scale higher," said Sriram BKR, Senior Investment Strategist at Geojit Financial Services.

Money following earnings?

It is often said that the market is a slave of earnings. And, it gets more apparent while dissecting long-term data.

Earnings per share of the Sensex has zoomed 46 times since 1990, whereas Sensex itself has grown over 66 fold. The EPS of the index was Rs 59 in 1990 which stood at Rs 2,706 in June 2023, the data showed. The corresponding Sensex TRI levels were 1,008 and 67,000.

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