Nifty 50 - Flashback & Future!

Nifty 50 monthly chart

The past few years have been great

• Nifty in CY22 managed to touch a brand new all time high, it was up 4% in CY22 which is the seventh consecutive year of positive returns for the index. This was a great achievement given the optimism, pessimism, volatility, divergence and unpredictability during these years.

• Nifty 50 delivered a approximately 14% CAGR (multiplied 2.2x) during the previous seven years while EPS posted a CAGR of approximately 12% during the same period. Last such rally was experience during CY02-07 when the index rallied for six consecutive years with a huge CAGR of 41% (multiplied 5.6x).

Consecutive seven years of positive returns

Stocks and sector performances

• But even after this great performance during these 7 years, just two sectors - Finance and Oil & Gas, were able to deliver a positive performance. Only two Nifty 50 stocks, Reliance Industries and HDFC Bank have been able to give positive returns in each of the seven years. No company was able to outperform Nifty 50 in all the seven years.

• Four stocks were able to outperform Nifty 50 in returns in six out of the seven years, they are :- Reliance Industries, Adani Enterprises, Bajaj Finance and JSW Steel. On the other hand, Coal India underperformed Nifty 50 in six out of seven years while BPCL, ONGC, Cipla, Tata Motors and Dr Reddy's Labs underperformed Nifty 50 in five of seven years.

• Asian Paints and Bajaj Finance declined for the first time in CY22 after delivering positive returns for ten consecutive years.

Past 7 years sectoral performance

Institutions

• During these past seven years, FIIs invested $30.4 billion in the Indian markets with five years of inflows and two years of outflows. 

• On the other hand, DIIs invested $80.5 billion since CY16 with $32.2 billion inflow in CY22 alone. They had just one single year of outflows since the last seven years.

FII, DII outflows & inflows

Will this performance continue? CY22 update

• Markets have been pretty volatile due to the macro headwinds. In these hard times, Indian stocks showed outperformed the global markets by a huge margin thanks to strong economic recovery, domestic tailwinds and resilient corporate earnings. PSU banks, Metals, Consumer, Private Banks, Utilities, Capital Goods, Automobiles and Oil & Gas have led the indices while Technology, Telecom, Media, Healthcare and Real Estate have been laggards in CY22. 

• However, India's growth in H2FY23 is expected to moderate with RBI projecting GDP growth of 4.3% which means pressure on corporate earnings who have been the most important driver of India's outperformance in the recent years. 

CY22 sectoral performance

So, do you think India's outperformance will continue over the next few years? Or this rally was just a temporary thing? 

Do let us know in the comments below!

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