1,000 to 17,000: 9 Money Making Lessons from the Nifty50 Journey

The markets continued to swing wildly this week with a slight positive bias. The volatility of the market in the last 6 months has made many retail investors wary of making investments. At this stage, it is important to recognize that despite changing economic dynamics, global shocks and structural changes, Nifty has delivered a CAGR of around 11 percent over approximately 27 years or an absolute return of 1700 percent. So a study of Nifty’s journey from 1,000 to 17,000 provides some key insights, briefly outlined below:

  1. Hit rate is overrated: Nifty has been right only 55 percent of the time, and despite that, it delivered an attractive CAGR of 11.31 percent. Therefore, there is no need to be right all the time. Half the time is enough.
  2. Let your winners run: Nifty’s average winning position is 1,500 percent and the average losing position is 45 percent. A position in profit is proof that he was right. Let it work without the urgency of a constant profit record.
  3. Don’t just run, let your winning age: Nifty’s average winning position is held for an average of 12.5 years and the average losing position is held for about 4 years. Give your winners more time.
  4. You don’t have to be hyperactive to make money: in its long and continuous lifespan, Nifty has made only 150 trades with an average of 4 share resets in a year. Despite such a low churn rate, it has managed to generate a CAGR of over 11%. Beat only if necessary.
  5. For a stock to be 100 bags, it must first be 10 bags – Nifty only buys proven winners. It doesn’t predict winners, but rather waits for real winners to emerge and, in many cases, ends up buying after a stock has multiplied by many. It is better to buy winners than to predict.
  6. All you need is just 3-5 ideas over your lifetime: JUST 3 stocks have contributed to more than half of the Nifty 50’s absolute returns over 27 years, and . No need to constantly search for ideas.
  7. An individual investor could cut losses even faster: Despite a clearly large losing position, NIFTY waits for a stock to drop below its range-low to exit. An individual has many advantages over an index or fund manager.
  8. It’s better to buy high and sell high than just buy low and sell high: Nifty makes most of his entries in All Time Highs without worrying about being late, and yet manages an attractive CAGR of 11%. The investor’s job is to make money, not to buy at the lowest possible price.
  9. Pick an investment style/method and stick with it: NIFTY’s style is Bhav Bhagwan. Does not evaluate the finances, does not comply with the procedures and does not know the business that the company operates. Despite this he manages to earn money.

So investors can apply these lessons to their investment journeys and hopefully generate good returns along the way.

technical perspective

The Nifty 50 closed in the positive this week with both the benchmark and Bank Nifty indexes recovering from the lows made last week. Despite the bounce, we believe that the market has not fully bottomed out as the Nifty price patterns reflect that the uptrend has been severely damaged. Even if we look at the weekly chart of the S&P 500 index, a head and shoulders breakdown has been witnessed. That said, a short-term rebound cannot be ruled out. Whether the bounce will play out as a relief rally or the start of a new move higher is not apparent as of now. So considering all these factors, going into the week ahead, we suggest that traders keep a cautiously bullish outlook as long as Nifty does not break below the 15,700 levels.


expectations for the week
Given the large number of key economic data releases, the current earnings season and the monthly expiry, the volatility seen this week is expected to persist. FOMC minutes, US GDP growth rate estimates and initial jobless claims will drive global market sentiment. Back home, India’s FX Reserves data which was in the news for falling to a one-year low and the INR/USD move will be closely watched. Markets will remain choppy and investors are advised to stay on the sidelines until a clear market direction emerges. The Nifty 50 closed the week at 16,266.15, up 3.067%.

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