Why Sensex has delivered no returns over last 1 year
What's the story
The Bombay Stock Exchange's benchmark index, the Sensex, has posted a return of -0.7% over the past year. The underwhelming performance is attributed to weak corporate earnings, persistent foreign portfolio investor (FPI) selling, and high valuations. Despite policy support like GST and income-tax relief measures, interest rate cuts, and strong domestic fund inflows, Indian equities have lagged behind their global counterparts.
Market dynamics
Massive FPI outflows
So far in 2025, FPIs have pulled out ₹1.4 lakh crore from Dalal Street, reallocating investments to other countries. Analyst Naveen Chouhan said the continued FII selling trend can be attributed to developed markets outperforming and currency concerns. He added that FIIs are moving capital back to their home markets or other developed economies, with better returns than emerging markets due to the Indian rupee's depreciation against major global currencies.
Earnings impact
Corporate earnings growth stagnation
Corporate earnings growth for Nifty 50 firms has been limited to mid-single digits, with delayed demand recovery and input cost pressures weighing on margins. Krishnan V R, Chief of Quantitative Research at Marcellus Investment Managers, said that valuation peaked around September-end last year. He added that with corporate earnings growth moderating to mid-single digits, it is no surprise equity indices have hardly delivered any returns over the past year.
External factors
Political uncertainties, trade tensions with US
Political and policy-related uncertainties have also impacted market sentiment. Sunny Agrawal, Head of Fundamental Research at SBI Securities, said populist measures adopted by the government at the beginning of its third term and a subsequent slowdown in government capex have deteriorated market sentiments. He added global uncertainties led to capital flight toward safe havens. Trade tensions with the US have further compounded these issues, creating policy uncertainty that heightened investor caution.
Resilience
SIP inflows have cushioned the market
Despite FPI selling, steady mutual fund systematic investment plan (SIP) inflows have cushioned the market from a deeper fall. Analysts claim the market is currently in a time correction phase, with the valuations staying elevated and prices consolidating instead of declining sharply. Neeraj Chadawar from Axis Securities said markets are moving in line with earnings growth, and the upcoming Q2 earnings season is likely to follow suit.