The National Stock Exchange (NSE) Fifty index, better known as the NIFTY 50, or just the NIFTY, is India’s primary stock market index. It was launched 25 years ago yesterday, on April 22, 1996, at an opening value of 1,136. Yesterday, on April 22, 2021, it opened at a value of 14,219.
This implies an annual growth rate of 10.64% for India’s stock index over the last 25 years.
If we add a percentage point or two for dividends and subtract the impact of inflation over the years, we end up with a mid to high single digit real return in the equity asset class over 25 years.
This number should be a source of humility for anybody who is looking to actively invest in the equity markets. Many professional investors consider beating the index by a few points to be a success, and rightly so. The price of the index essentially reflects the combined opinions, expertise and knowledge of an entire country. At any given point, investors in India arrive at a judgment about the health and prospects of the nation’s economy and its entrepreneurs. The 25-year NIFTY graph is nothing but the temporal representation of these judgments.
As an individual investor, it is best to begin the investment process with a healthy respect for this collective national intelligence.