Nifty 500 Adjusted for Inflation: A Deeper Perspective
A very interesting chart shared by Zafar Shaikh on X shows Nifty 500 adjusted for inflation, giving a clearer picture of real market returns over time. If we look at the index without adjusting for inflation, the 2008 peak was surpassed around 2013-14. However, when inflation is accounted for, the market only truly broke out beyond the 2008 peak after COVID in 2020-21.
Key Takeaways from the Chart
The market can sometimes grow in nominal terms while remaining stagnant in real terms. For example, from 2008 to 2019, Nifty 500 grew from 6,000 to 12,000, but inflation-adjusted returns remained flat. This means that while investments seemed to be growing, they were only keeping up with inflation, not actually creating significant real wealth.
Strong inflation-beating rallies come in phases, as seen in the post-2020 period, where real growth accelerated. These phases can last for a decade but are often followed by long stretches where the market may rise nominally but fail to outperform inflation.
The current fall in the inflation-adjusted Nifty 500 is approaching an important level. If it retests the breakout zone from 2020-21, it could set up a very strong base for a new long-term rally. However, this level is still about 15-20% lower from the current market, and unless a major market event occurs, reaching that level seems unlikely.
What to Watch Next
If the market corrects significantly and revisits this inflation-adjusted breakout zone, it could provide a once-in-a-decade buying opportunity. However, if the market holds above current levels, the uptrend may resume without such a deep retest.
What’s your take on this inflation-adjusted view of Nifty 500? Share your thoughts in the comments.
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