How much can you realistically earn in 5 years from stock market?

This article analyzes realistic 5-year stock market returns for Indian investors in FY 2025-26. We examine historical Nifty 50 data (15.1% CAGR), the impact of the new 12.5% LTCG tax, and the “real” returns adjusted for inflation. The analysis reveals that while mid-cap and small-cap funds offer higher potential (21-25%), they come with increased volatility. We also highlight the critical importance of asset allocation and the stark contrast between long-term investing and the 91% loss rate in F&O trading.

Investors often ask: “If I invest ₹10,000 monthly, where will I be in 2030?” The answer isn’t a single number—it’s a range defined by asset class, market valuations, and taxation. In the current landscape of December 2025, with the Nifty 50 PE ratio stabilizing around 22.5 and inflation projections moderating, the window for wealth creation remains robust but requires disciplined execution. This guide breaks down the math, the taxes, and the strategy you need.

The “Realistic” Number: What History Tells Us

When we talk about a Guide to how much can you realistically earn from the Indian stock market in 5 years, we must look at rolling returns rather than point-to-point returns. Rolling returns smooth out the noise of specific market peaks and troughs.

Benchmark Returns (As of December 2025)

Data from the last decade gives us a clear picture of what different market segments deliver. As per NSE indices data:

Data Source: NSE Indices / Forbes India (November 2025). Past performance is not indicative of future results.

The Reality Check: While Midcaps have delivered exceptional 24% returns, they are volatile. A realistic conservative estimate for financial planning should be lower. Most financial planners recommend assuming 12% for Large Caps and 14-15% for Mid/Small Caps to build a margin of safety.

The PE Ratio Context

Valuation matters. As of December 10, 2025, the Nifty 50 Price-to-Earnings (PE) ratio stands at ~22.5.

• Why this matters: A PE of 22.5 is near the 10-year average. It suggests the market is neither dirt cheap nor in a dangerous bubble (like the PE of 38+ seen in 2021). This supports the case for steady, earnings-driven growth rather than a speculative frenzy.

The “Real” Return: Adjusting for Inflation and Tax

Your bank balance might show a profit, but your purchasing power tells the real story. To understand how much can you realistically earn from the Indian stock market in 5 years, you must subtract inflation and taxes.

1. The Inflation Factor

As per the RBI’s latest forecast (December 2025), CPI inflation for FY 2025-26 is projected at a surprisingly low 2.0%. However, for a 5-year horizon, relying on this low figure is risky. The 5-year average inflation rate in India (up to 2024) is approximately 5.6%.

• Planning Tip: Always assume 5-6% inflation for long-term goals. If inflation stays at 2%, consider it a bonus.

2. The Tax Impact (FY 2025-26)

As per Union Budget 2025, the taxation rules for equity are:

• LTCG (Long Term Capital Gains): 12.5% on gains exceeding ₹1.25 lakh in a financial year.
• STCG (Short Term Capital Gains): 20% on gains booked within 12 months.

The Calculation: What You Actually Keep

Let’s calculate the net return on a ₹10 Lakh lumpsum investment over 5 years, assuming a 13% market return.

The Verdict: Even after a 12.5% tax, equity delivers nearly double the post-tax returns of traditional fixed deposits (typically 6-7% pre-tax) over 5 years.

SIP vs. Lumpsum: The 5-Year Projection

Most investors use Systematic Investment Plans (SIPs). Here is a projection of Guide to how much can you realistically earn from the Indian stock market in 5 years using a monthly SIP of ₹25,000.

Scenario Analysis: ₹25,000 Monthly SIP (Total Invested: ₹15 Lakh)

Note: Values are pre-tax. Returns are assumed for illustration based on historical trends.

Key Insight: In a moderate scenario, your money grows by roughly 37% in absolute terms over 5 years. The power of compounding is just starting to kick in at the 5-year mark.

Understanding Risk Factors

It is impossible to discuss returns without discussing risk. The “realistic” part of this guide requires acknowledging that markets do not move in a straight line.

1. Volatility is the Price of Admission

In the last 5 years, the Nifty 50 has seen drawdowns (falls from peak) of 10-20%. During the COVID-19 crash (2020), it fell nearly 40%. To earn the 15% average, you must sit through the -20% periods without selling.

2. The F&O Trap

Many investors try to speed up their returns using Futures & Options (F&O).

• The Data: As per a SEBI study released in July 2025, 91% of individual traders in the equity derivatives segment incurred losses in FY 2024-25.
• The Lesson: Trading is not investing. For realistic wealth creation, stick to delivery-based investing (Cash Market).

3. Sector Rotation

Winners change. In 2020-21, IT and Pharma led the rally. In 2023-24, PSU banks and Defence stocks surged. A diversified portfolio (or a Flexi-cap fund) ensures you capture winners without needing to predict them.

Key Takeaways

• Expect 12-15%: A realistic pre-tax return expectation for a diversified equity portfolio is 12-15% CAGR.
• Inflation is Low (For Now): With RBI projecting 2% inflation for FY26, your real returns are currently exceptionally high. Capitalize on this.
• Tax Reality: Factor in the 12.5% LTCG tax. It reduces your net CAGR by approximately 1-1.5%.
• Avoid F&O: The probability of loss is 91%. Do not risk your long-term capital here.
• Time is Key: A 5-year horizon is the minimum to smooth out volatility. The probability of negative returns in Nifty 50 over any 5-year period is historically near zero.

Action Plan

Follow this monthly roadmap to align your portfolio for the next 5 years.

Month 1: Foundation & KYC

• Complete your KYC and open a demat account if you haven’t.
• Define your financial goal (e.g., “₹20 Lakh for down payment in 2030”).
• Start a small SIP in a Nifty 50 Index Fund to get comfortable.

Month 2: Asset Allocation

• Split your investable surplus: 60% Large Cap (Stability), 30% Mid Cap (Growth), 10% Small Cap (Alpha).
• Set up auto-debit mandates for your SIPs.

Month 3: Review & Tax Planning

• Check if you have existing investments. Harvest losses (if any) to offset future gains.
• Ensure you aren’t over-diversified (holding 10+ mutual funds is unnecessary).

Month 4-60: Discipline

• Increase your SIP amount by 10% every year (Step-up SIP).
• Review portfolio performance every 6 months, not every day.
• Rebalance if your asset allocation deviates by more than 5%.

Conclusion

So, how much can you realistically earn from the Indian stock market in 5 years? History suggests a range of 12-15% CAGR is achievable with a disciplined approach. This translates to doubling your money roughly every 6 years. While the new tax rules take a small bite, the post-tax returns still far outpace inflation and fixed income options. The key is to start now, stay diversified, and ignore the noise of short-term volatility.

Ready to build your 5-year wealth corpus? Open your PL Capital account and start your SIP today.

FAQs on Stock Market Returns

1. What is a realistic return from Nifty 50 for 5 years?

Based on historical rolling returns (as of late 2025), a realistic expectation is 12-14% CAGR. While the last 5 years delivered ~15.1%, it is safer to plan with conservative estimates to account for market volatility.

2. How does the 12.5% LTCG tax affect my returns?

The 12.5% tax applies only to gains above ₹1.25 lakh/year. For a typical investor, this reduces the net annual return (CAGR) by about 1-1.5%. For example, a 13% gross return might become ~11.8% net return.

3. Can I earn 20% returns annually?

Consistently earning 20% is rare for broad indices. While Midcap and Smallcap funds have delivered 21-25% recently (5-year CAGR), they carry higher risk. Expecting 20% every year is unrealistic; 15% is a more sustainable target for aggressive portfolios.

4. Is it safe to invest for just 3 years?

Three years is considered a short horizon for equity. While profitable, the risk of capital erosion exists. A 5-year horizon significantly reduces the probability of negative returns. For 3-year goals, Hybrid or Balanced Advantage Funds are safer.

5. Why is the inflation rate important for my returns?

Your “real return” is Return minus Inflation. With RBI forecasting ~2% inflation for FY26, a 12% market return is excellent (10% real return). If inflation rises to 6%, that same 12% return is less valuable. Always track real returns.