Mumbai: Should investors brace for modest returns over the next few years? A study of stock market cycles for eight-year periods by Samco Securities shows that phases of exuberance follow periods of lower returns. The stock market may have entered the eight-year cycle of moderate performance in 2024, it said.

The Sensex returns in rupee terms have been between 190% and 1,500% in past three bullish eight-year cycles since 1984. In bearish periods, their returns dropped to the range of 20-50%

During bearish periods, the value of Indian equity holdings in dollar returns has declined. This may often prompt foreign portfolio investors to move their investments out of India to other markets.

“Foreign portfolio investors typically wait for early signs of return in dollar terms, before increasing their exposure, and may adopt a similar approach before decisively buying again in India,” said Ramesh Mantri, chief investment officer at WhiteOak Capital AMC.

Mantri said that over the next eight years, market returns will largely be influenced by the earnings growth of Indian companies, which, in turn, is closely tied to the country’s economic prospects.

Since 2024, Sensex is down 0.9% in rupee terms and 3.9% in dollar measures.”Geopolitical uncertainties, sluggish earnings visibility and stretched valuations have played a major role for the lack of returns in last one year,” said Apurva Sheth, head of research at Samco Securities. “Apart from this, the most important factor that drives these cycles is the principle of reversion to the mean-a tendency for prices to return to their long-term averages after deviating too far.”