Yeh aur kitna upar jayega? Rukta hi nai haii!! This ain’t coming down!
It’s almost certain that this thought is going in our head for a pretty long time and is becoming more pronounced day by day.
Yeah! your guess is right! For those who are still not able to figure out, this is about our Indian Stock Market indices – Nifty and Sensex.
Since March last year when markets made the bottom at ~7500 levels, it has been a stellar bull run across all segments of companies – be it Large Cap, Mid or Small Caps! And is showing no signs of stopping!
The moot question now is “How much more the indices could rise? Is the bull run over? or there is much more to go?”
First of all, we have to be clear on what reference point we are talking about when we say “The indices have risen so much”? – If your reference point is March lows, then it’s totally fair to say that Indices have more than doubled in such a span of time. So, a correction could be around the corner. (But has the bull run ended – Not yet!)
We all say equities are to be viewed as a long term compounding asset class. So, in that sense there could be extreme returns on both sides for some periods, but its the long term compounded growth rate (CAGR) that determines how sustainable the rally could be in the coming years.
Equities over the long term have given roughly around 15% on a CAGR basis. Before the covid pandemic, the one incident that come to our mind wreaking havoc across all financial asset classes is the Global Financial Crisis!! From the peak of 2008 till today, despite the indices doubling from 2020 March lows, BSE Sensex has only given around 8-9% return on a CAGR basis. So, you can see that equity markets have had a dull period for more than a decade now; giving just in par returns offered by some fixed income instruments.
Also, just before giving you another data point, we all value our country in terms of dollars, right? – “India will become so and so trillion dollar economy in these many years”. Also, when we talk about our Indian companies (startups, listed), numbers related to fund raising, market cap are all provided in dollar terms. So, why shouldn’t we view our Stock Markets also in DOLLAR TERMS? If we would have seen what our stock markets have done in dollar terms, then the thought of being skeptical about the current rally wouldn’t even come to our mind for a second.
In Dollar terms, Sensex has only surpassed the peak achieved in 2008 during this stellar bull rally!! You read it right, the peak of 2008!!
From the peak of 2008, BSE DOLLEX has given a CAGR of just ~3% on a CAGR basis. The index peaked at 4430 in 2008 and now as we are writing, its currently at 6250.
See below the chart of BSE DOLLEX, which can be found on trading view:
To conclude, in our opinion there is a lot of steam still left for the Stock Markets. However, do note, this journey will have it’s own set of roadblocks in terms of correction. So, instead of running your head on when the market will top out and crash, become a buyer of these healthy correction that will come along during this bull run through means like MF SIPs, Stock SIPs, direct equity and so on!
Hope you found this article insightful! Do let us know about your views in the comment section. And please share these with your friends!
Until next time, Stay Safe and Stay Healthy!