Nifty 50
Nifty 50's five-year CAGR dips below 5.5%, trailing bank FD returns
The Nifty 50 index has delivered a five-year Compound Annual Growth Rate (CAGR) below 5.5%, according to recent data, placing its long-term returns beneath prevailing bank fixed-deposit yields. Over the same period, bank FDs have offered returns ranging from 6% to 6.5%, outperforming the index’s price-based growth. The five-year SIP XIRR for the Nifty 50 stands at approximately 4.5%, reflecting the impact of staggered investments during a period of market stress. This underperformance has been influenced by elevated US 10-year bond yields, sustained crude oil prices, and broader equity market weakness, with the Nifty 50 down around 13.5% year-to-date and the Sensex close to 15% lower.
Experts caution against conflating different return metrics, noting that SIP XIRR reflects periodic investments, while lump-sum CAGR captures a single initial outlay. The Nifty 50 price index delivered a five-year CAGR of roughly 5.2% based on levels from September 2021 to September 2026, falling short of inflation and FD returns. However, the Nifty 50 Total Return Index (TRI), which includes dividends, shows stronger performance, with some index funds tracking it delivering annualised returns above 7.5% in direct plans. Analysts stress that dividend income, absent in price index calculations, plays a material role in total equity returns, particularly for dividend-focused stocks.
The discussion has prompted reevaluation of the ‘Mutual Fund Sahi Hai’ narrative, with analysts emphasizing that the slogan does not guarantee outperformance over fixed deposits across all timeframes. While some active funds have generated alpha in the last five years, passive index funds typically lag the TRI slightly due to expenses and tracking differences. Experts recommend a nuanced approach to asset allocation, advocating comparisons that include taxation, inflation, and fund structure—such as evaluating bank FDs, Nifty 50 index funds, diversified equity, hybrid, and debt funds—rather than relying on broad equivalences between equity, SIPs, and mutual fund returns.
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