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Charts & Analysis

The Nifty Adjusted For Consumer Price Inflation Is Still Lower Than 2008

If you had put Rs. 10,000 in the Nifty in 2000, and had reinvested all dividends it would have grown to Rs. 69,410 today. (From the “Total Returns” index given by the NSE). This means you’ve just had a 7x return on the biggest index in about 15 years.

However, if you consider the buying power of the rupee, it has declined due to inflation. If we take the Consumer Price  Index (CPI) and back-cast it all the way to 2000, and then run the same calculation on the Nifty (with dividends reinvested) our answers are very different:

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As you can see, after adjusting for inflation, even though the Nifty is close to an all time high, the purchasing-power adjusted Nifty is still only a little bit above levels seen in 2011 (the previous peak) and then, much below the effective level in 2008 January.

This means all these returns we’re all proud of hasn’t even crossed the highs of the 2008 era, after adjusting for inflation.

All the western countries seem to be begging for some inflation. India just has too much of it.

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