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MOSL: INDIA STRATEGY-Nifty hits 10k mark after a stirring 22-year journey-Taking a trip down the memory lane

​India Strategy: Nifty hits 10k mark after a stirring 22-year journey; Taking a trip down the memory lane – Nifty: Then and Now

A flashback – 1995 to 2017

For the first time in its history, the Nifty has crossed and closed above the psychological 10K mark. With this, the Nifty has now become the second Indian benchmark index to trade in five digits.

• The Indian markets remain buoyed by continued liquidity inflow amid a strong macro backdrop. Domestic MF inflows in CY17 YTD stand at USD7b, matching inflows recorded in the entire last calendar year. Even more notable are FII flows of USD8.6b, higher than those recorded in CY15 and CY16. We note that the macro backdrop remains best in recent times, with inflation under control, twin deficits in check, stable currency, and policy momentum intact (evident from the smooth and timely GST implementation). Only missing link in an otherwise positive set-up is earnings recovery, in our view. Nifty earnings have remained flat for the last five years (4% CAGR over FY12-17) and hold the key for further re-rating, in our view.
• In markets, one always looks at the future. Today, we make a small departure to this trend and look back at the past. In this note, we will also share some interesting tidbits of the Nifty’s journey from 1,000 in 1995 to 10k today.

• Nifty up 10x in ~22 years, market cap expands 48x
• While traversing its journey from 1K to 10K, the Nifty has delivered 11% CAGR returns. Meanwhile, the market capitalization of the index has expanded 48x from INR1.5t to INR70.6t, implying a CAGR of 20%.
• The journey of Nifty from 1k to 2k was most excruciating, which took a total 2,282 trading days (almost nine years). The move from 6K to 7K also took some time (1,589 trading days, 6.5 years), with the markets being stranded in a long phase of correction in the aftermath of the Global Financial Crisis (GFC) in 2008.
• From 26 June 2009, the index shifted its computation to free-float methodology.