Two Years, Almost No Returns: What 25 Years of Nifty Data Shows?

“Life can only be understood backwards. But it must be lived forwards.”

This quote captures something every investor eventually experiences. Markets make more sense in hindsight. But while we are living through a difficult phase, nobody knows exactly when it will end.

Indian equity investors have experienced that uncertainty over the past two years.

Between 16 September 2024 and 15 September 2026, the Nifty 50 Total Return Index, which includes dividends, generated an annualised return of -1.9%. The Nifty Midcap 100 TRI returned 3.7% annually, while the Nifty Smallcap 100 TRI returned 1.3% annually.

These are not literally zero returns. But after considering inflation and the risk involved, the experience has felt close to stagnant.

Now, remember the first half of that quote. Life can only be understood backwards.

So let us look backwards. To see if it helps make sense of where we are today.

How Unusual Are Negative Two-Year Returns?

To answer that, we first need to define the measurement.

A two-year rolling return compares the index value on each trading day with its value two years earlier. Because this calculation is repeated daily, consecutive observations overlap. Thousands of negative observations, therefore, do not represent thousands of separate market events.

NSE Indices examined the daily rolling returns of the Nifty 50 TRI from 30 June 1999 to 30 June 2025. It found that the index produced a negative two-year CAGR in 17.1% of observations.

These observations were concentrated around a few difficult market phases, including the dot-com and post-9/11 weakness, the 2008 global financial crisis, the prolonged slowdown around 2011-13 and the COVID crash.

Each episode had a different trigger. What they shared was the investor experience: a prolonged period in which equity returns appeared to be going nowhere.

What Happened After Earlier Flat Periods?

A separate Edelweiss Mutual Fund analysis identified 11 occasions since 2001 when the Nifty delivered flat or near-flat returns over two years.

According to published reports, the index generated a positive return over the following year in all 11 observations, with returns ranging from approximately 5% to 50%. Subsequent three-year annualised returns were also positive, ranging from approximately 7% to 40%.

That history is encouraging, but it must be interpreted carefully.

Eleven observations constitute a small sample, and some may come from overlapping parts of the same market cycle. More importantly, historical returns cannot tell us when the current phase will end or what the next return will be.

The useful lesson is not that a recovery is guaranteed. It is that a disappointing two-year return has not historically meant that equities stopped creating value permanently.

Why Diversification Matters During the Wait

The most difficult part of a stagnant market is not understanding it later. It is remaining financially and emotionally prepared while it is happening.

This is where diversification becomes practical.

CRISIL data reported by SBI Mutual Fund show that between December 2019 and 23 March 2020, the Nifty 50 fell 37%. Over the same period, the CRISIL Dynamic Gilt Index returned 2.35%, while gold prices in rupee terms rose 7%.

Using those returns, a simple illustrative portfolio containing 60% equity, 30% debt and 10% gold would have declined approximately 20.8%, before costs and rebalancing.

It would still have lost money, but considerably less than an equity-only portfolio.

Diversification does not eliminate losses. It reduces dependence on a single asset class and may provide liquidity when one part of the portfolio is under pressure.

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The Mathematics Behind Diversification

Suppose two assets each have 20% volatility, and an investor allocates equally to both.

If their returns are perfectly correlated, the portfolio’s volatility remains 20%. If their correlation is zero, portfolio volatility falls to approximately 14.1%. If correlation becomes negative, volatility can fall further.

The benefit comes not merely from owning more investments, but from combining assets that do not move together perfectly.

Actual correlations can change, especially during a crisis. Diversification, therefore, reduces risk rather than removing it.

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What the Data Tells Us Today

The current two-year return is weak. History shows that similar periods have occurred before and were eventually followed by stronger returns.

But the data cannot tell us whether the present phase will last another month or much longer.

That uncertainty is why a portfolio should be built around financial goals, liquidity needs, investment horizon and risk capacity, not around a prediction of the market’s next move.

The real lesson from 25 years of data is not:

“Wait because the market must rise soon.”

It is simpler:

Flat markets are part of equity investing. Diversification can make them easier to endure, and a weak recent return alone is not evidence that a long-term investment plan has failed.

Learn more : How to choose Mutual Fund

FAQs

Is it normal for equities to deliver negative returns over two years?

Not common — but not rare either. NSE’s analysis found it in 17.1% of daily rolling observations between 1999 and 2025. The negative periods always clustered around specific episodes — and every single one of them ended.

Should I stop my SIP during a flat market?

A flat market alone may not be a sufficient reason to stop an SIP. Regular investing purchases more units when NAVs are lower and fewer when they are higher.

However, AMFI cautions that rupee-cost averaging neither assures a profit nor protects against losses. The decision should depend on your goals, emergency liquidity, investment horizon and risk capacity.

Why does diversification help during a flat equity market?

When equity is flat or falling, other asset classes like gold and debt often move differently. In 2026 — gold delivered approximately 28% while equity went nowhere. Debt returned approximately 7%. A portfolio holding all three took a much smaller hit than one sitting entirely in equity. That is diversification doing exactly what it is supposed to do.

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