An interesting perspective, I received this on my WhatsApp last week….
US By 1999, 49% of Americans Owned Equities, this Percentage was just 3% in 1980. These 20 years was also the Time when Warren buffet, Paul Tudor Jones, George Soros were Created.
In 2017 only 3% Indian owns Equities..
In 1979, the BSE Index was 100
Today it is over 33,000
That is a return of over 17% per annum.
If we were to add back dividends received and assume that they were to be reinvested in the BSE-30 Index, then the return is nearly 20% per annum
Over the past 37 years, the Indian economy has grown by a real rate of GDP of 6.3% on average,
Inflation, as measured by the CPI, has been in the 8% range
Add the two together and you get 6.3% + 8% = 14.3%
Let’s round that down to 14%
This is the approximate rate of growth of activity in the overall economy, taking into account the level of prices of various goods and services at that point in time. This is also called the nominal rate of growth in GDP.
So, the economy grew by 14% per annum for the past 37 years and the BSE-30 Index grew by 20% per annum.
Now if, over the next 33 years, the Indian economy is to grow by, say, 6% per annum and inflation is to be, say, 5% per annum then the nominal rate of GDP for the next 33 years will be = 6% + 5% = 11%.
If a 14% nominal rate of growth in the economy between 1980 and now resulted in a 20% average per annum growth in the Index over the past 37 years, then what should a 11% per annum growth in nominal GDP result in over the next 33 years – till the year 2050?
Sensex 4,076,470 doesn’t seem extraordinary now, does it?
“If the bull market journey is from Mumbai to Delhi, we have probably reached only Borivali” –