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Charts & Analysis

Inflation Ensures Nifty is Nowhere Close to All Time High In "Real" Terms

You know how much inflation eats into your returns? This much: Adjusted for inflation, the Nifty is 10% lower than the highs we saw in 2008. Although the Nifty has moved 30% higher than the 2008 levels in “absolute” (i.e. not inflation adjusted terms). We take the Nifty (including the impact of reinvesting dividends) and show you how inflation has made all the difference:

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Turns out that despite the recent drop in Gold price, the best return in inflation adjusted terms is in the shiny metal since 2007. However, if you had bought after September 2012, it would’ve given you lousy returns.

We map the growth of Rs. 10,000 invested in Gold, Public Provident Fund (PPF) or the Nifty (assume reinvestment of divideds) PPF is the second best, which still lost money in absolute terms. The Nifty’s done badly in comparison:

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Inflation is one tough beast. If it gets out of control, it distorts your return analysis like in the graphs above. Let’s hope it comes back in our control.

  • Krish says:

    Looking at this article am tempted to cash out my equity portfolio and opt for tax free NRE FDs.

  • rakesh ojha says:

    FOLLOWING EXPLAINS HOW DANGEROUS INFLATION IS
    By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
    John Maynard Keynes
    Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.
    Ronald Reagan
    In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. . . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth.” –Alan Greenspan, 1966

  • Yathartha says:

    Why assume that all my investments will in Nov 07 to Jan 2008 only?

  • Sameer says:

    A good analysis….but it says that Nifty is a under-performing asset and under performance do not promise good returns.