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2015 Ends At An Inflation Adjusted Nifty Even Lower Than 2010

If you’re invested in the Nifty, you might think, that at 7,900 it’s way higher than the “highs” of 6300 in 2007. In reality, though, inflation has eaten through your returns, and how!

We measure the Nifty as adjusted for inflation – by adjusting what Rs. 10,000 could buy, using the CPI. The chart (red line) depicts the growth of Rs. 10,000 in constant purchasing power terms – that is, adjusted for the Consumer Price Index. We take the Nifty including Dividends reinvested, which is depicted in an

Nifty Adjusted for Inflation What we find is:

  • The market has done very well over 15 years – more than double in constant purchasing power terms (10,000 becomes 22,000)
  • However most of that return came till 2007. Since then, inflation is a dampener
  • The highs of Dec 2007/Jan 2008 are still a “high” in purchasing power terms. Even now, after 8 years, as the Nifty is about 40% higher, Inflation means the Nifty adjusted for inflation is 24% lower than the Dec 2007 high.
  • And at the current point we are even lower than the intermediate high we saw in 2010! (in purchasing power terms)

What this has meant is a “lost 8 years” for India. Even 2015 was a lost cause – with a 4% down year on the Nifty, and 6% inflation.

Note: We said in January 2015 that the Nifty was breaking through new highs, but wasn’t a high adjusted for inflation or for the P/E ratio. But hey, the P/E ratio has risen through the year, largely because Nifty company earnings have collapsed. More on that in another post!

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