A Study of Rates of Return from Investors’ Perspective:Empirical Evidence from India

This paper assesses equity returns from the investors’ point of view, factoring both sources of income—viz., dividends and capital gains. The sample for the study comprises of the NSE 500 companies which represented 96.76% of the free-float market capitalization and 97.01% of the traded value of the stocks listed on the NSE as on December 31, 2013, and the period under study, is spread over the past two decades (1993-2014). Hence, virtually, the chosen sample presents a census on equity market returns in India. Comparisons with an earlier study have been made to provide the readers with a larger perspective on the evolution and behaviour of equity returns in India, for a period of nearly three decades (1985-2014). Further, a brief comparison with the alternative investment choice, viz., debt instruments, has also been made for a more complete analysis of returns from the investors’ point of view. To the best of the authors’ knowledge, such a comprehensive analysis of equity returns in India, has not been undertaken so far. It appears safe to assume that the Indian stock markets offer attractive returns in the short-run as well as the long-run. But, it would be prudent to stay invested for a longer period if the investor is risk-averse, as the volatility present in the short-run may eat away into short-run returns. Further, in terms of after-tax returns and liquidity, equity returns in India fare better than debt returns. However, in terms of risk (volatility), debt returns provide a safer option.