Investment Insights: Understanding Nifty 50's Returns and Trends in the Past 5 Years

The Nifty 50, India's main broad market benchmark index, has been making headlines in recent years for its steady and sustained uptrend. Early in December 2023, the NSE's star index breached the 21,000 mark for the first time. Interestingly, it took only 61 sessions for the index to make the 1000-point journey from 20,000 to 21,000.

As market analysts remain eager about what the coming year could bring in for the Nifty 50(if you wish to checkout detailed everyday analysis of NIFTY 50, you can check it here), it is also crucial to understand the historical trajectory of this benchmark index. Decoding the Nifty 50's returns in the last 5 years can provide vital insights for both seasoned investors and newcomers.

Analyzing Nifty 50's Returns Over the Last Five Years

The Nifty 50, computed using the free float market capitalization method, is a well-diversified index of 50 companies that offers a broad view of market conditions. Here are the key highlights of the Nifty 50's returns in the last 5 years and its performance during this period.

A Remarkable Journey of Growth

Examining the Nifty 50's returns in the last 5 years reveals a striking growth trajectory. The index surged from 10,772 points in July 2018 to 19,313 points in July 2023, marking an impressive jump of over 79%. This period was characterized by resilience in the face of global economic challenges like geopolitical tensions and inflationary trends.

Detailed Analysis of the Nifty 50's Returns in 5 Years

A crucial aspect of the Nifty 50's returns in the last 5 years involves distinguishing between price returns and total returns. The price return, which solely considers the appreciation of the index, stood at 13.11% over the 5-year period ending November 30, 2023. In contrast, the total return during this period, which includes dividends reinvested, was higher at 14.46%. This difference is critical for investors as it highlights the additional value derived from dividends.

Strong Key Fundamentals

The Nifty 50's returns in the last 5 years are supported by its fundamental attributes. With a dividend yield of 1.35, a price-to-earnings (P/E) ratio of 21.52 and a price-to-book (P/B) ratio of 3.53, these metrics provide insights into the index's valuation and rationalize the bullish investor sentiment.

Economic Policies and Market Reactions

Fiscal and economic policies have also greatly influenced the Nifty 50's returns in the last 5 years. The Union Budgets from 2018 to 2023 played a pivotal role in shaping market sentiments, with the benchmark index having rallied in double digits from one Union Budget to the next. Notably, the Nifty 50 rallied by 26% from the 2021 to 2022 budgets, highlighting the positive impact of fiscal policies on investor confidence.

Global Reach and Passive Funds Growth

Another dimension of the Nifty 50's returns in the last 5 years or more is the index's growing international appeal. Passive funds in international markets tracking the Nifty 50 witnessed a 53% CAGR growth in assets over a decade, reaching an AUM of $70 billion by 2023. This growth is a testament to the global investment community's confidence in the Indian market.

SIP Investments and Index Funds

The Nifty 50's returns in the last 5 years also shed light on how SIP investments in index funds have been a lucrative strategy for investors. For instance, a consistent monthly SIP of Rs. 25,000 in these index funds could have transformed to a whopping Rs. 21 lakh by 2023, at an average annualized return of around 13%. This growth is backed by the strong performance of the Nifty 50 Total Return Index (TRI), which has appreciated by 13.7% annually during this period.

Nifty 50's Returns in the Last 5 Years: Why it Matters to Traders and Investors

As a trader or investor in the stock market, how do you know if your trading performance is improving or declining? Merely looking at absolute profits and losses and losses will not suffice. To understand and assess your trading performance accurately, you need to compare your performance with the market's. In other words, benchmarking is key.

Here's why standards and yardsticks like the Nifty 50's returns in the last 5 years can be crucial for you.

Benchmarking Against the Nifty 50's Returns in the Last 5 Years

The Nifty 50's returns in the last 5 years or any other period of your choice serve as an essential yardstick. Benchmarking against such standards helps identify the strengths and weaknesses in your approach and helps you align your trading strategies with market dynamics.

Data-Driven Decision Making

Analyzing the Nifty 50's returns in the last 5 years empowers you to make data-driven decisions. You can leverage data about the benchmark index's performance to identify periods of high growth potential and adjust your portfolio accordingly.

Sectoral Analysis for Diversified Investments

The diverse composition of the Nifty 50 allows you to understand which sectors have been the growth drivers over the past five years. By strategically participating in these sectors, you can replicate or exceed the index's performance.

Making Index Benchmarking Effective with Samco's Advanced Analytical Tools

To keep pace with the market, it's vital that you employ advanced analytical tools and real-time data. Historically, traders and investors have faced a significant challenge due to the lack of solutions that could make this possible. Samco Securities has effectively bridged this gap with advanced analytics offered on its new-gen trading app. This pioneering stock broker stands out as a revolutionary player in India's financial sector, renowned for its emphasis on offering deep, data-driven insights. At the core of Samco's philosophy is the belief that informed decision-making is the key to successful investing.

Samco's trading app is an personalised insights-driven platform that offers a unique feature to traders. Aptly named 'My Trade Story,' this industry-first feature analyses your past trades & gives personalised insights of your trading so that you can find areas of improvement in your trading. With these personalized insights, traders in the Samco community can assess their past performance and align it with their future goals.

In the context of benchmarking against market indexes, two key features available for free on the Samco trading app stand out - namely the Personal Index and the Net Worth Tracker.

1. Personal Index

To understand if you are underperforming or outperforming your benchmark, it's essential to first quantify your individual trading performance. That's precisely what Samco's Personal Index does. With this feature, you can quantify your real-time personal rate of return and compare it with the indices you have benchmarked.

For instance, say your Personal Index on the Samco trading app shows 5-year annualized returns of 16%. When compared to the Nifty 50's returns in the last 5 years of around 14.46%, you've outperformed the benchmark. This indicates that your investment strategies have been effective.
However, if your Personal Index indicates a return of 12% in the same period, it's lower than the Nifty 50's returns in the last 5 years. This underperformance could be due to a more conservative investment approach or less optimal timing in the market. Such insights from comparing your Personal Index with the Nifty 50 can help you reassess and potentially improve your investment strategies for future gains.

2. Net Worth Tracker

Your net worth is the total value of all the assets held in your portfolio. On the Samco trading app, the net worth of all your assets held in your account adds up. This includes your stocks, derivative positions in equity and currency segments, mutual fund investments and even your cash balance.
Samco's Net Worth Tracker shows you how your net worth has increased or decreased over specific periods - which could be daily, weekly, monthly or annual time frames. You can even compare your net worth ranking with other traders in the Samco community to benchmark your financial performance more easily and comprehensively.

Summing Up

The Nifty 50's returns in the last 5 years offer vital insights for aligning your investment strategies with the broader market trends. The index's performance serves as a benchmark to measure and refine your approach. By comparing your portfolio's returns against this index, you gain a clear perspective on how well you're navigating market trends.

Utilizing tools like Samco's Personal Index and Net Worth Tracker can further refine this process and empower you to make data-driven decisions. They offer a measurable way to assess your trading performance and enhance your strategies as required.