Time has come to temper expectations on stock returns; past is no crystal ball

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Subscribe to enjoy similar stories. Stock market experts have cautioned investors that past performance is not a crystal ball for future gains. Given the Nifty 50 index’s hefty 26% return over the past year, investors may need to scale back their return expectations for equities.

While the returns ahead might still be solid, they probably won't match the high-flying levels seen before, experts said. Shweta Rajani, head of mutual funds at Anand Rathi Wealth, anticipates returns of 11%-12% from the Nifty 50, while mid- and small-cap indices could offer 13%-15%. “Additionally, considering the economy is expected to grow at a nominal rate of 10-11%, equity markets are likely to align with this growth, suggesting that investors should temper their expectations to an 11-13% return from Indian equities," Rajani said.

The Nifty 50’s returns over the past year have been the highest since the 51% gain from November 3, 2020, to November 3, 2021, according to data from Capitalmarket. However, record outflows by foreign institutional investors in October due to a shift to equities in China, weak corporate earnings and premium valuations have started to curb those gains. Nilesh Shah, managing director at Kotak Mahindra AMC, told Mint recently that replicating the returns of the past five years will be challenging over the next five years.

“Therefore, it’s essential to moderate our return expectations," Shah said. According to Aamar Deo Singh, senior vice president for research at Angel One, overall, the Indian markets have outperformed many global markets in recent years. However, after lacklustre corporate earnings and record sales of about ₹1 trillion by foreign investors in October alone, there’s been a drop of 20%-50% in the