Over the past few years, a surprising trend has emerged—both new and seasoned investors have begun to believe that equities should consistently deliver 18–20% CAGR. Many of them anchored these expectations to the extraordinary post-COVID rally, where portfolios doubled in less than two years. But the hard truth is, such returns are outliers, not the rule. Long-term equity markets, even in India’s high-growth story, have historically settled in the 11–13% range. Expecting anything more on a sustained basis is like winning a lottery—possible, but highly improbable.

Back in early 2020, when everything shut down, our lives shrank to four walls and a glowing screen. Some of us binge-watched shows, some followed news obsessively, but a huge number of people discovered stock market apps for the first time.

Markets had crashed to rock bottom—Nifty at 7,610 in March 2020—but what came next was surreal. Within 18 months, the index had doubled. Imagine this: ₹10 lakh invested then could have been worth ₹20 lakh before you even realized it. Normally, that kind of compounding takes six to seven years. Suddenly, making 30–40% a year felt "normal." Twitter threads and WhatsApp groups turned into mini stock forums, full of stories of “easy” money.

The problem? It was never normal. What we saw was an exception, not the rule.

Why Those Returns Happened

That spectacular rally wasn’t because businesses suddenly doubled profits. It was fuelled by:

  • Rock-bottom interest rates  
  • Trillions of rupees pumped in as stimulus  
  • People stuck at home with fewer expenses, moving savings into markets
  • Central banks doing everything to keep economies afloat  

It was the perfect storm. And just like every storm, it passed.

The Investor Frenzy

This period changed the investing culture in India. Demat accounts exploded—from about 4 crore in March 2020 to over 10 crore by August 2022, and 20 crore in June 2025. The post-COVID era saw a retail participation boom, powered by fintech apps, SIPs, and a new generation of investors entering the markets. Fixed deposits looked dull, so people pulled money out and jumped into equities.

Small-business owners who had seen earnings collapse put their money into stocks instead of restarting their shops. And since everything from large caps to penny stocks was rising, people thought stock-picking was easy—buy anything and it’ll go up.

The Reality Today

If we zoom out, the pattern is clear: normal → abnormal → back to normal.

  • 2010–2019: Equities grew steadily at ~10–12% CAGR. Slow, steady, boring compounding.
  • ‍2020–2021: Nifty doubled in less than two years. Portfolios saw 60–100% absolute gains—something that usually takes years.
  • ‍2022: With rates rising, markets cooled. Annualized returns dropped to ~4–5%. ‍
  • Late 2024 onwards: After the September peak, the correction dragged portfolios down. Since then, long-term averages have reasserted themselves.  

As on August 31, 2025, here’s what the numbers actually look like (Nifty 50):

  • 1-year return: –3.21%  
  • 3-year CAGR: ~11.21%  
  • 5-year CAGR: ~16.5%  
  • 10-year CAGR: ~11.85%  

That 5-year number grabs attention, but it’s misleading—it comes from a very low base in August 2020. It’s a numbers game: today’s 16.5% looks flattering because of where we started.

To keep that same ~16.5% CAGR alive one year from now (on 31 Aug 2026), the Nifty would need to be around 36,700. If the index simply stays flat for the next 12 months at current levels, the rolling 5-year CAGR will collapse to just ~7.3%. So yes, the long-term averages are back where they always were.

If we look at Nifty from 1st January 2020 to 31st August 2025, the index has delivered a respectable ~13% CAGR. But if we shift the starting point just a few weeks later to the COVID bottom on 23rd March 2020, the same Nifty looks like it has compounded at an extraordinary ~24% CAGR. The market hasn’t really changed—it’s the base effect that makes all the difference. This is why anchoring long-term expectations to one-off lows or peaks can give a distorted picture of reality.

A Simple Analogy

Think of dropping a ball. If we just let go, it bounces to a normal height. But if we slam it down, it shoots up unusually high. That doesn’t mean every bounce will be like that—it was just because of where it started. The COVID rally was that “slam bounce.”

Resetting Expectations

The real winners will be those who stop chasing miracles and focus on steady compounding. Investing isn’t about finding the next rocket stock, it’s about aligning money with life goals and sticking to the plan even when markets look “boring.”

COVID gave us a once-in-a-generation rally. But it was a freak event, not a new normal. Anchoring expectations to that time is like expecting lightning to strike twice.