BSE Sensex and Nifty 50 have surged over 10 per cent so far in February in a broad-based Union Budget 2021-driven rally.
Motilal Oswal analysts say that Nifty’s journey from 1,107 to 2,000 was the most excruciating, as it took a total of 8.7 years. Image: Reuters
BSE Sensex and Nifty 50 have surged over 10 per cent so far in February in a broad-based Union Budget 2021-driven rally. The 30-share Sensex has claimed the crucial 51,000 level, while the broader 50-stock NSE Nifty climbed to above 15,000 level. Nifty took nearly 18 years since inception to reach 7,000-mark, while the next 8,000 points accrued in less than seven years. On the back of the fast-spreading coronavirus pandemic, the benchmark index tumbled to a low of 7,600 in March 2020. However, staging a smart recovery, it nearly doubled and zoomed to 15,000 levels in 220 days. This sharp recovery was aided by benign global liquidity backdrop, better containment of COVID-19 cases, a sharp recovery in corporate earnings, and a market-friendly budget, say analysts at Motilal Oswal Financial Services.
In the last 25 years since Nifty 50’s inception, the index has delivered calendar annual returns of more than 20 per cent in 10 years; while it declined in 7 years. While traversing its journey from 1,107 to 15,000, the Nifty (up 14x) has delivered 11.1 per cent CAGR in the last 25 years.
Motilal Oswal analysts say that Nifty’s journey from 1,107 to 2,000 was the most excruciating, as it took a total of 2,167 trading days (8.7 years). The move from 6,000 to 7,000 levels was also prolonged (1,589 trading days, or 6.5 years) as the markets took time to recover from the long phase of correction in the aftermath of the GFC in 2008. “On the other hand, the move from 14,000 to 15,000 has been the quickest — covered in just 25 days. Of course, as the levels move higher, every 1k point journey implies lower percentage returns,” they added.
The brokerage firm also stated that the Nifty in April 1996 had zero representation from Technology, and was dominated by Consumer, PSU Banks and other sectors such as Oil & Gas, NBFC, Autos, Metals, and Textiles. Back then, private banks had only one representative in the form of HDFC Bank.