26 July 2017
India Strategy
BSE Sensex: 32,382
NIFTY MILESTONE JOURNEY
Index base period (3
November 1995) value
set at 1,000
S&P CNX: 10,021
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
n
Nifty @ 1,000
1995
2004
Journey to 2k was
most excruciating,
taking a total of 2,282
trading days
Nifty @ 2,000
n
2006
Market cap of Nifty
touches 14t
Nifty @ 3,000
2006
Crossed 4k level in Dec
2006; exited the year
with 40% return
Nifty @ 4,000
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2007
Crossed 5k in Sep
2007, crossed 6k in the
same year
Nifty @ 5,000
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.
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.
Out of the 50 stocks in Nifty, 15 have been part of the index since its inception -
RIL, HDFC BANK, HDFC, SBI, HUL, ITC, TATA MOTORS, HERO MOTORS, TATA
STEEL, HINDALCO, ACC, AMBUJA, L&T, DR. REDDY and TATA POWER.
The combined market-cap of these 15 stocks increased at 18% CAGR since
inception. These 15 stocks weigh 46% in Nifty today v/s 53% at inception.
Best performers (mkt. cap multiple since Nifty inception, % CAGR): HDFC Bank
(693x – 36%), Hero Motocorp (126x – 26%), HDFC (68x – 22%), ITC (65x – 22%),
Dr Reddy's Lab (65x – 22%) and Reliance Inds (55x – 21%).
Over the years, the sectoral representation in the Nifty has undergone a sea
change, in consonance with the changes in the underlying economy – new
sectors have evolved, while some of the erstwhile dominant sectors of the
economy have lost relative importance in the new India.
1
Nifty up 10x in ~22 years, market cap expands 48x
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2007
Fastest 1k jump, taking
just 52 trading days
Nifty @ 6,000
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2014
Journey to 7k was also
agonizing, taking 1,589
trading days
Nifty @ 7,000
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2014
2 fastest 1k jump,
taking 77 trading days,
post BJP winning Lok
Sabha election
Crossed 9k on strong
buying from FIIs and
mutual funds
nd
Nifty @ 8,000
30% of index constituents unchanged over 22 years
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Nifty @ 9,000
n
n
2017
2017
Macro backdrop
remains best with
continued strong
inflows in equities
Nifty @ 10,000
Sunrise and Sunset: Some sectors acquire prominence, others fade
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Gautam Duggad
- Research Analyst
(Gautam.Duggad@MotilalOswal.com); +91 22 3982 5404
Deven Mistry
- Research Analyst
(Deven@MotilalOswal.com); +91 22 3982 5440
July 2017
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.