As the Nifty hits a new high, it’s useful to see Nifty adjusted for inflation – that is, despite the fact that the Nifty has hit the highest ever value, what does it mean for you once adjusted for inflation?
For this, we look at purchasing power of the money you have today. We have two inflation indexes – the Wholesale Price Index (WPI) since 2000, and the Consumer Price Index (CPI) for Industrial Workers since the same date.
Take an investment in the Nifty in the year 2000, and then “adjust” it for each of these indexes. If the index was 100 in 2000, and it’s now 180, that means prices are up 80% since then. So a Rs. 10,000 today will not buy you what Rs. 10,000 would buy you in the year 2000 – it would buy you, in 2000 terms, things worth Rs. 10,000 * (100/180) = Rs. 5,556. So effectively, you had to grow your money […]