There are very few instances of 10-15 per cent return from the equity market in a calendar year, says IDFC Mutual Fund in its market outlook for 2019.

“Only once since 1979, has the Sensex given returns in the range of 10-15 per cent,” IDFC Mutual Fund said.

The Sensex returned 13 per cent in the year 2004, otherwise returns have been either higher or lower than the 10-15 per cent range, the report said.

The Sensex returned 6 per cent in the calendar year 2019 and since 1991, only two times has it given negative returns in consecutive years.

Since 1991, the Sensex has given returns in the range of 0-10 per cent in four years, including 2018. In the previous three such instances, next year returns have been higher by 73 per cent, 30 per cent and 28 per cent.

Sensex returns are like an inverted normal curve with very few instances of 10-15 per cent and probability of extreme returns.

Earnings recovery is the key to market performance; the last four years have seen sharp downgrade in earnings estimates as each of the years has witnessed a large sector contributing disproportionately to the earnings cut due to reasons such as sharp fall in commodity prices, disruption due to demonetisation, GST rollout, NPA recognition by bank, the report said.

However, the NPA cycle is likely to have peaked and negative surprises are unlikely, the report said.

Macros are in favour of the market, with oil and bond yields, which were adverse for most of the year 2018, have now turned favourable for equity market, the report said.

Valuations are moderate, though not cheap, and have moderated from the peak of calendar year 2017 and are now reasonable, especially in the mid-cap

and small-cap space, the report says.