BSE Sensex and Nifty 50 have surged more than 10 per cent so far in February in a broad-based Union Budget 2021-driven rally. The 30-share Sensex has claimed the essential 51,000 level, though the broader 50-stock NSE Nifty climbed to above 15,000 level. Nifty took almost 18 years because inception to attain 7,000-mark, though the next 8,000 points accrued in significantly less than seven years. On the back of the quick-spreading coronavirus pandemic, the benchmark index tumbled to a low of 7,600 in March 2020. However, staging a wise recovery, it almost doubled and zoomed to 15,000 levels in 220 days. This sharp recovery was aided by benign worldwide liquidity backdrop, much better containment of COVID-19 situations, a sharp recovery in corporate earnings, and a marketplace-friendly spending budget, say analysts at Motilal Oswal Financial Services.
In the final 25 years because Nifty 50’s inception, the index has delivered calendar annual returns of more than 20 per cent in 10 years though 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 final 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 extended 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.
13 stocks traversed the complete Nifty 50’s journey
Out of the 50 stocks in the Nifty, 13 businesses — HDFC Bank, Reliance Industries Ltd (RIL), Housing Development Finance Corporation, ITC, Hindustan Unilever Ltd, L&T, State Bank of India (SBI), Tata Motors, Dr Reddy’s Laboratories, Tata Steel, Grasim Industries, Hero MotoCorp, and Hindalco Industries Ltd — have been a portion of the index’s journey because inception. The report highlighted that the combined marketplace-cap of these 13 businesses has grown at a CAGR of 18 per cent involving April 1996 and February 2021. Besides, in line with the alter in the underlying composition of the Nifty, the valuation multiples of the Nifty have also moved up. “The average P/E multiple of the Nifty between Apr’1996 and Feb’2021 stands at 15.7x; however, the average for the last 10 years is 18.8x,” it 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 type of HDFC Bank.