Two claims dominate every FD-versus-equity debate. Online, you hear that the Nifty gives 12–15% a year while FDs give 6%. At home, you hear that FDs are safe and the market is a casino. Both are half right. I re-checked the numbers against NSE’s own factsheets, AMFI NAV data, World Bank inflation data and current bank rate cards. The picture is more interesting than either side admits.
The short version
• Over 20 years, the Nifty beat a typical FD by about 3 percentage points a year, not 8 or 9.
• Over the last 5 years, the gap was roughly zero. Over the last 12 months, the Nifty trailed a 6.25% FD by about 17 points.
• After tax and inflation, a 7% FD in the 30% slab lost about 1.4% of purchasing power a year. The Nifty, after LTCG tax, gained about 2.9% a year.
• Compounded, ₹10 lakh became about ₹25.6 lakh in that FD and about ₹60 lakh in the Nifty. In start-date rupees, that is ₹7.5 lakh versus ₹17.7 lakh.
What the Nifty actually delivered
NSE’s Nifty 50 Whitepaper 2026 reports a 20-year return of 12.44% a year for the Total Return Index (dividends reinvested) and 11.09% for the price index, for the period ended 27 February 2026 [1]. That is the source behind most “12%+” claims. But it is a snapshot from before this year’s fall. NSE’s factsheet for 30 September 2026 shows the TRI down 12.61% year to date and 7.09% over one year, with a five-year return of 6.38% a year. Since inception in 1995, the TRI has compounded at 12.12%.
A second cut uses actual index-fund NAVs from AMFI, which include dividends and deduct fund costs. As of 12 October 2026, when the Nifty closed at 22,363, it shows:
| Window | Nifty 50 index fund, annualised |
|---|---|
| 1 year | −10.8% |
| 3 years | 5.0% |
| 5 years | 5.3% |
| 10 years | 10.8% |
| 15 years | 11.2% |
| 20 years | 10.0% |
The 20-year figure here is lower than NSE’s 12.44% because the end date is later, the start date has moved forward, and fund costs are deducted. Which number is “right” depends on the window you pick. That is the point.
What an FD actually delivers
SBI’s one-year FD pays 6.25% and its five-year pays 6.05% (September 2026) . For the full 20 years, a cash-like proxy is the liquid fund, which returned 7.0% a year . Compilations of bank rate cards put FD rates anywhere from roughly 5% to 9% across the period, higher in 2006–2011 and lower in 2020–21 . I use 7.0% pre-tax as the base case, with 6.25% and 7.5% as sensitivities.
Two features matter. FD interest is added to your income and taxed at your slab rate, with TDS starting above ₹50,000 a year (₹1 lakh for senior citizens). And deposits are insured up to ₹5 lakh per depositor per bank, principal and interest together.
The 20-year scoreboard: ₹10 lakh
Inflation over the 20 years averaged 6.3% a year, which means what ₹1 lakh bought then costs about ₹3.4 lakh today. The last column converts each outcome into start-date rupees using that figure.
| Scenario | Pre-tax return | ₹10 lakh becomes (before tax) | After tax | In start-date rupees |
|---|---|---|---|---|
| FD, 0% slab | 7.0% | ₹38.7 lakh | ₹38.7 lakh | ₹11.4 lakh |
| FD, 20% slab | 7.0% | ₹38.7 lakh | ₹29.4 lakh | ₹8.7 lakh |
| FD, 30% slab | 7.0% | ₹38.7 lakh | ₹25.6 lakh | ₹7.5 lakh |
| Nifty, low case | 8.0% | ₹46.6 lakh | ₹42.0 lakh | ₹12.4 lakh |
| Nifty, verified 20-year | 10.0% | ₹67.3 lakh | ₹60.0 lakh | ₹17.7 lakh |
| Nifty, NSE TRI (Feb 2026) | 12.44% | ₹104.3 lakh | ₹92.2 lakh | ₹27.2 lakh |
My calculations. FD interest is taxed each year at slab rate plus 4% cess. The Nifty is redeemed in one go at the end, with LTCG at 12.5% (plus cess) on gains above ₹1.25 lakh. Fund costs and exit loads are not modelled separately.
Why the gap is smaller than YouTube says
- The long-run gap is about 3 points, not 9. On the verified 20-year numbers, the Nifty compounded at 10.0% against roughly 7.0% for cash-like instruments. Before tax, that is ₹67 lakh versus ₹39 lakh, a multiple of 1.7x, not the 4–5x that headline numbers imply.
- The window decides the answer. Over five years, the Nifty returned between 5.3% (index funds) and 6.38% (NSE TRI), against a 6.05% five-year FD. Over one year, the Nifty is down 10.8% . The same index looked like 12.44% over 20 years in February and about 10% in October.
- The range of outcomes is wide. Across every rolling window since 2006, one-year returns ranged from −52.7% to +80.8%. Five-year returns ranged from −1.4% to +23.3% a year [3]. An FD’s range, by contrast, is the rate you locked in.
- Falls can last years. The Nifty fell about 60% between January and October 2008, and it took until December 2013, 61 months after the bottom, to regain the previous peak. Today, it is still 14.5% below its previous peak.
Why it is bigger than your parents believe
- Inflation does the damage quietly. At 7% pre-tax and 6.3% average inflation, an FD’s real return is only about +0.7% a year, and that is before tax . The liquid fund tells the same story: roughly 0.7% a year above inflation over 20 years.
- Tax turns that into a loss. In the 30% slab, a 7% FD nets about 4.8%, which is below inflation.
- ₹10 lakh grew to ₹25.6 lakh on paper but is worth only ₹7.5 lakh in start-date rupees. The FD preserved the number on the statement, not the purchasing power.
- A 3-point gap compounds into more than double. After tax, the Nifty’s ₹60 lakh is 2.3 times the 30%-slab FD’s ₹25.6 lakh, and about 2 times the 20%-slab FD’s ₹29.4 lakh.
- Time reduces equity risk, within limits. Across 126 rolling ten-year windows since 2006, none was negative, and the worst was 5.6% a year. 98% of five-year windows were positive [3]. But that history covers roughly two decades and a handful of market cycles, so treat it as evidence, not a guarantee.
So how should you think about it?
This is a framework, not advice.
- Money needed within about three years. Rolling three-year Nifty returns ranged from −1.7% to +27.4% a year. This is the FD’s job: principal certainty, with interest above the savings rate.
- Money for five years or more. Outcomes widen. Five-year Nifty windows have ranged from slightly negative to over 23% a year, so the FD’s predictability has real value here.
- Money for ten years or more. History has favored equity over both nominal and real FD returns, but the sample is short and the 2008 episode shows the path can be rough.
- Safety cap. DICGC insurance covers ₹5 lakh per depositor per bank [8], so large FD balances should be spread across banks.
The cleanest summary: FDs protect you from volatility, and the Nifty has historically protected you from inflation. Most households need both, for different jobs.
Comment and share your thoughts!