714 Days and Counting – The Stock Market Isn’t Cooperating With the Bachcha Party

The BSE Sensex – India’s most popular stock market index – reached an all-time closing high of 85,836 points on September 26, 2024.

It has been close to two years and the Sensex hasn’t crossed that level again. As of September 9, 2026, the Sensex closed at 74,764 points or nearly 13% lower than the September 2024 high. 

Those in the business of managing other people’s money (OPM) have constantly tried to talk up the market.

Also, many of the newer investors – or as veteran investor Shankar Sharma likes to call them – the bachcha party – still can’t get their heads around what has happened.

In their world, where financial influencers ruled, stock prices were supposed to only go up. 

Take a look at the following table. It plots the longest gaps between the Sensex reaching an all-time closing high and then crossing that level again. 

 

Source: Author calculations on data from bseindia.com (as of September 10)

As can be seen from the above table, the longest gap between two highs was 1,766 days. This was from 12 September 1994 to 14 July 1999, a period of close to five years. This was between the vanishing-companies scam where companies raised thousands of crore through IPOs and disappeared, and the rise of the dotcom bubble. 

The current gap comes to around 713 days and is ninth on the list. (In fact, by the time this piece comes out, it will be 714 days and counting.) 

Of course, some of these instances are from the twentieth century. So, the bachcha party may not find it interesting enough.

This was a time when probably their parents were as old as they are now.

But there are five instances from the twenty-first century as well. So, that’s enough and more evidence.

The point being that stock prices can stay dull for longish periods. They may not necessarily go up just because they had gone up in the recent past. 

Now, some might argue that only taking the Sensex into account is a very narrow way of looking at things. Not really, given that the Sensex stocks represent around 31% of the total market capitalisation of all stocks listed on BSE. (The Nifty 50 represents around 54%.)

Nonetheless, let’s look at the NSE Nifty 500 Total Returns Index as well. The stocks in this index represent a little over 92% of the free-float market capitalisation of all stocks listed on NSE. 

Further, the index also takes dividends given by companies into account while calculating returns.

It needs to be mentioned here that the data for the Nifty 500 Total Returns Index starts from January 1995 onwards, whereas the data for the BSE Sensex is available from April 1979 onwards. 

Source: Author calculations on data from niftyindices.com (as of September 10)

It’s interesting that in the case of the NSE 500 Total Returns Index the longest gap between closing all-time highs is 2,274 days against 1,766 days for the Sensex. This gap was after the financial crisis of 2008 had broken out. Small- and midcap stocks took time to recover from the hammering they received. 

Further, this index has fewer longer gaps between all-time highs because it starts only from 1995 as against 1979 for the Sensex. 

But most importantly, the NSE 500 Total Returns Index peaked at 38,659 points on September 26, 2024. It closed at 36,929 points on September 9, 2026, or 4.5% lower. 

Mean Reversion
This raises two points.

First, regression to the mean – the tendency for extreme outcomes to be followed by more moderate ones – has been at work.

From end December 2019 – a few months before the March 2020 stock market crash due to the pandemic – up until September 26, 2024 – the day NSE 500 TRI peaked – the average annual return worked out to 22.4%. 

In comparison, the returns from end December 2019 to September 9, 2026, work out to around 14.6% per year, significantly lower than the 22.4% per year seen earlier. 

If we look at the long-term return of the NSE 500 TRI – from January 1995 up until now – it works out to a little over 12% per year. 

Now, regression to the mean isn’t an exact science. Nonetheless, it does explain what has happened over the last two years, in the simplest possible way, of course, with the benefit of hindsight.

Second, the broader NSE 500 TRI index has fallen much less than the BSE Sensex over the last two years. And one reason for that has been the lackadaisical performance of largecap stocks in comparison to midcaps and smallcaps.

For the market to make a sustained move higher, largecap stocks will eventually need to start delivering. They account for a large chunk of the market, and there is only so much heavy lifting the smallcaps can do.

Of course, the OPM wallahs who are perpetually ready to sell a story, have jumped in and have been pushing the idea that smallcap stocks are where all the returns lie. Big money has flown into these stocks over the last few months, and driven up prices. 

The trouble is that most smallcap stocks do not have much liquidity. Hence, when money floods in, prices go up very fast, as do their valuations. 

Take the case of the BSE SmallCap Select Index. The price-to-earnings ratio averaged 29 in April 2026. It’s almost close to 42 now. 

In fact, the price-to-earnings ratio has averaged 40.1 in 2026-27, the highest level since data for the index became available in 2015-16.

As DSP Mutual Fund pointed out in August 2026, the valuations of small and midcap stocks are high compared with their history. 

Further, this race towards smallcap stocks is what ace fund manager S Naren, chief investment officer of ICICI Prudential Mutual Fund, calls anti-asset allocation. He recently pointed out that in January 2026 investors invested in silver and gold, which was anti-asset-allocation. Silver and gold prices peaked during late January 2026.

He further pointed out that, now investors are taking money out of largecap funds and putting money in smallcap funds, and that is anti-asset allocation as well.  

Also, from the point of view of risk, smallcap stocks remain a very risky bet. And that needs to be kept in mind before going whole hog into them.

It’s worth remembering that on January 7, 2008, the BSE SmallCap index hit its then all-time high. By March 9, 2009, it had fallen nearly 80%. Of course, that doesn’t mean history will repeat itself. But higher risk doesn’t necessarily mean higher returns. It can also mean higher losses. That, after all, is why it is called higher risk. (The BSE SmallCap index has since been discontinued.)

To conclude, all this reminds me of something a hedge fund manager told me many years ago, after his fund hadn’t really delivered the kind of returns that he had promised investors while raising money: “The market isn’t cooperating,” he had said. 

The trouble is, the markets aren’t meant to cooperate. They do what they do.

And for a generation that has grown up watching the stock market go up almost every year, two years of going nowhere can feel like a very long time. But that is how markets work.  

They go up, they go down and sometimes they simply sit around doing nothing. The bachcha party is perhaps slowly learning that bit.