Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Charts & Analysis

Chart: Nifty Adjusted For Inflation Shows Us The Lost Decade In Indian Stocks


Stocks are great for long term investment but the returns should beat inflation. Inflation is essentially a drop in purchasing power – so what you buy in 2007 for Rs. 100 will cost you Rs. 200 today at an average of 8% inflation each year. So your stocks need to be going up by at least 2x since 2007, which is just about meeting inflation. Anything more than that is your “real” return.

We take the Nifty – and to be fair, we add the impact of dividends (the concept is: when you get dividends you reinvest it back into the Nifty) – and then use the CPI (Consumer Price Index) to “deflate” it to have a constant purchasing power back to 1999.

This tells us how much the Nifty has returned, net of inflation.

Nifty Adjusted for Inflation

The answer isn’t great. An investment of Rs. 10,000 in the Nifty in the year 2000 would net us Rs. 20,679 now in real terms – a post inflation return of around 5% a year (this is not bad at all).

However, what it also says is that the net return is lower than the peaks of 2007 (29K in the same purchasing power) and in 2010 (24K). While the peak in Jan 2015 was higher, we have currently reverted to levels that were earlier seen in April 2006!

This almost means a lost decade, mostly due to high inflation. You can see the unadjusted number is much higher – so inflation has lifted your stock values, but in real terms has given you very little. 


Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial