Stock Market Average Returns Over The Past 10 Years: The performance of the stock market serves as a barometer for the growth of the overall economy.
The performance of an economy can be easily understood by analyzing and monitoring the performance of the stock market. Several investors enter the stock market in the hope to build wealth and meet financial goals.
They have all the reasons to do this as equity is that asset class that can help beat inflation. In the long run, stock markets have flourished and several investors have made returns.
Stock market average returns can help us provide a fair idea of how the Indian economy has fared in the past. In this article, the focus will be on the average returns delivered by the stock market in the past 10 years. Read on!
Stock Market Average Returns Over The Past 10 Years
In the past 10 years (i.e., between Aug 30, 2012- Aug 30, 2022), NIFTY50 has delivered an average return of ~14.1%. The NIFTY 50 index is a well-diversified index comprising 50 companies that exhibits overall market conditions.
This index is computed with the help of the free float market capitalization method. NIFTY50 is used for several purposes including benchmarking fund portfolios, launching index funds, etc.
Over the past 5 years to Aug 30, 2022, NIFTY50 has delivered a price return of ~12.36%. The index is made up of several sectors. The financial services sector represents the highest weightage of 36.96%, while the IT sector occupies the second spot at ~14.2%.
Therefore, the performance of NIFTY50 can majorly be influenced by the performance of the financial services sector.
Movement Of Stock Markets – What Causes It?
Before we discuss stock market average returns, it is important to know how prices change and how the share markets move. We will also understand the factors behind the fluctuations in the stock markets.
The stock market is an easy and quick way to multiply one’s wealth. While some people are afraid to enter the stock market, there are some individuals who have seen multibagger returns.
People try to avoid stock market investments because of constant fluctuations in the market. The main goal of trading is to purchase stocks and then sell them at a profit.
Prices in the stock market are affected by demand-supply economics. When a stock’s demand exceeds its supply, there will be an upward movement in stock price.
Therefore, the more drastic this demand-supply gap, the higher the price. When several traders try to buy stock X, its price tends to go up and vice-versa. Stock prices are also affected by the upgrades or downgrades given by renowned analysts.
Factors Affecting Share Prices
There are several factors that affect share prices. The following are some of them:
1. Company Earnings
Investors prefer long-term investment in a company that makes consistent profits. Therefore, the number of buyers is more for such companies, resulting in their share prices rising.
Companies that are listed on stock exchanges are required to declare earnings every quarter and annually. Therefore, investors can visit the company’s website and check its earnings report whether has met or exceeded projections.
A company that reports solid growth per share will see higher demand. Therefore, stock prices tend to fluctuate whenever a particular company comes out with its earnings.
Stocks are expected to show significant movements whenever there is some news related to that company. If the company reports that it has acquired another company which can be beneficial in the long run, the stock price will shoot up.
Similarly, if any news piece exhibits that it is financially struggling, then the price tends to significantly fall. People will sell such stocks because they fear that the company might close down its operations.
Changes in government support and other financial events like the annual budget can also affect stock prices.
Stock market average returns tend to be affected by factors including confidence in the economy, government support, inflows and outflows by foreign institutional investors/ domestic institutional investors, etc.
The more confident an investor is about a company’s future, the more likely he/she is willing to buy the stock. Getting to know the factors which push stock prices up or down is of utmost importance to get a fair idea about the stock market.
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