The Nifty50 turned 25 this year on April 22. It started with a base of 1,000 and is currently trading at 15,867. In its 25-year-long journey, the index has risen almost 16 times its original base. In terms of returns, it has generated returns of around 11.5% per annum for the past 25 years.
On the other hand, the BSE Sensex launched in 1979, completed 42 years this year in April. It has generated returns of around 16% per annum for the past 40-plus years. These are no mean achievements.
Just Rs 20,000 invested in Sensex in 1979 when it was launched would have made you a crorepati today.
Rs 7 lakh invested in NIfty50 in 1996, when it was launched, would have made you a crorepati today.
This is the power of compounding, the benefit of staying put and investing with a long term view.
Many people who invested similar amounts or higher could have fulfilled their milestone goals like daughter’s marriage, children’s foreign education or retirement.
Indian markets, like other global markets, are on a roll since recovering from a crash precipitated by the pandemic last year. Rising cases globally and spread of delta variant, high inflation, and other fears are being ignored by the markets.
Indian markets have doubled from levels seen in March last year. In the last one year, Indian markets have generated the 3rd highest returns worldwide. Liquidity, and lack of other profitable investment avenues have made equities most sought after.
More than a crore new demat accounts have been opened in the last year.
With interest rates on fixed deposits low (around 5.5% for 5 year FD), inflation high 6%+, investors are making negative real returns on term deposits. The real estate market is in a flux. In metros rents have fallen sharply after the lockdown as employees moved back home.
Despite the devastation caused by the pandemic, Indian economy has bounced back strongly with GDP growth of 1.6% in Q4 of the financial year (FY) 2020-21.
The growth story for India is intact and we are in a multi-year bull run cycle as projected by many experts like Rakesh Jhunjhunwala, Raamdeo Agarwal and others.
The Sensex could touch 200,000 points in the next 10 years, according to on account of favourable factors like steady economic growth over the last few years and key indicators such as democracy, demography, digitisation, dollar reserves, and a stable government.
This translates to a per annum growth of 15% which is still 1% lower than what Sensex has achieved till date.
This translates into a 20% per annum return which is very bullish in my opinion.
A Times of India analysis on 30 years of economic reforms projects the Sensex to reach 100,000 points by 2027 and 1,500,000 by 2051!
Both these projections are attainable as they assume an annual growth of 12%, which is equal to historical growth returned by Nifty50.
This means that Rs 7 lakh invested in the markets today — Nifty50 or Sensex — could fetch you Rs 2 crore by 2051. You could then become a double crorepati in the next thirty years by the time you retire by investing merely Rs 7 lakh.
Disclaimer: This is not an investment recommendation and readers are expected to do their own research or consult their investment advisor before making any investment decisions.