NIFTY @ 10,000

Nifty from 1K to 10K took 21 years but jump to 100,000 will come sooner than you expect 

The Nifty raced to 10,000 mark in about 21 years, but the journey from 10,000 to 100,000 will not even take 21 years, suggest experts. The rally will be supported by a strong macro environment, bounce back in earnings growth, pro-growth reforms, stable political environment, and global liquidity.

From its base value of 1,000 in November 1995, the Nifty reached the 2000 mark in December 2004, taking 9.1 years to double. Thereafter, the journey of Nifty was swift wherein it reached the 6000 mark in only 2.9 years.

It took another 6.4 years to reach the 7000 mark in May 2014 from 6000 in December 2007. The 9000 level was achieved in March 2017 which was relatively faster from 7000 level taking only 2.8 years.

The flagship index ‘Nifty’ hit the 10,000 mark on July 25, 2017, taking only 4.3 months to move from 9,000 to 10,000.

“The Nifty from its launch took more than 21 years to be 10x to touch 10K. I'm sure the next 10x i.e. 100K will take much shorter time,” Nirmal Jain Chairman of IIFL said.

The Index has rallied by about 22 percent so far in the year 2017 supported by favourable global markets, low commodity prices, stable macros back home and political stability.

Even though the index might be trading at valuations which might appear slightly expensive when compared with long term average but lower than the peak of 2000 and 2008.

An intermediate correction in this ongoing bull market cannot be ruled out, but the recovery will be fast and swift because there is lot of money waiting on sidelines. The best strategy for investors is to buy into quality stocks on declines.

Since inception, the Nifty has given annualized returns of 11.2 percent, while having annualized volatility of 24.5 percent, said an NSE document.

The Nifty as on July 24, 2017, was trading at P/E of 25.45x and P/B of 3.55x which is lower than the previous highs of 28.5x on Feb 11, 2000, and 6.6x on Jan 08, 2008 respectively, it said.

“Indian markets have reached a new high with Nifty at 10,000 and Sensex past 32,000! It is an affirmation of the strength of Indian economy, the structural reforms that are being implemented viz., the GST, Insolvency & Bankruptcy code etc. and lastly the good monsoon which is expected to bring cheers to the rural economy,” Arun Thukral, MD & CEO, Axis Securities told Moneycontrol.

“The markets are factoring in corporate earnings growth followed by a good monsoon and enhanced transparency with the implementation of GST. The valuations are above mean, but we are still away from the frothy valuations seen in 2007-08,” he said.

What is fuelling the rally?

The current rally in Indian market is fuelled by strong liquidity from both global as well as domestic investors. Reforms initiated by the Modi-led government reaffirms the faith of foreign investors in the India growth story which could well stay for another 7 years.

The recent IMF report on India GDP growth also added to investor confidence. India GDP growth rate unchanged at 7.2 percent in 2017-18 and 7.7 percent in 2018-19 which will still be higher than China.

The IMF also kept its outlook for World GDP growth unchanged at 3.5 percent in 2017 and 3.6 percent in 2018. China’s growth is expected to strengthen to 6.7 percent in 2017, up 0.1 percentage point from the April forecast.

“The Nifty at 10,000 looks dizzy by all standards but the excitement on the street doesn’t seem to be waning off anytime soon. India no doubt is one of the beacons of hope and glimmer in an environment of otherwise slowing GDP growth,” Amar Ambani, Head of Research - IIFL Investment Managers told Moneycontrol.

“India has over the past 3 years seen its policy reforms from the government which has only made our backbone stronger for the next level of growth. Increased financial penetration and movement of capital from physical assets to financial assets is a trend which is here to stay for the long term,” he said.

Ambani advises investors to remain invested for the long term and any correction in the short term of 5-10 percent should be seen as opportunities to add to equity exposure.