The four most dangerous words in a Bull Market
“ This Time its Different “
There is no way to quantify such sayings but are randomly used to show intelligence, ridicule, wisdom or just stupidity etc or a mix of all !!
The Last Bull Market Top was in 2008 and its almost 10 years and now unanimously everyone accepts we are in a Bull Market.
Let us look at the Returns of Nifty 50 ….
10 Yr Cagr from Dec 31st 2007 to 31st Dec 2017 on Nifty 50 and TRI
5.54 %
9 Yr Cagr from Dec 31st 2008 to 31st Dec 2017
15.5%
Even if we take Total Returns Index it shifts to 6.78% and 16.51%.
This is the Difference of Buying at Top and Buying at Bottoms. But even if you got the 2008 bottom right in Nifty50 the Returns would be around 15-17% CAGR over the last 9 years.
Are the returns as great like previous Bull Markets for market to start talking – “This Time is Different “ argument to justify valuations.
So what is different ?
The Nifty 50 itself is different from what it was 10 years ago. The Nifty50 is Different today !!
Do read the previous posts on it
The Ship of Theseus Paradox – Nifty 2008 and Nifty 2016
Nifty 2016 is a very different animal from Nifty 2008 !!
The Top 20 of Nifty50 in 2008 and Nifty50 in 2018.
Interesting Facts
- Out of the Top 20 stocks in 2007 only 10 remain in 2015 in the Top 20 weights.
- The Top 5 stocks of 2008 – Reliance/ONGC/Bharti/NTPC/SBIN commanded a weight of 34.83% in 2008 and now command a weight of only 12.35%
- The Top 5 stocks in 2018 – HDFC Bank/Reliance/HDFC/ITC/Infy now have a weight of 34.56% had a weight of only 22.10% in 2008
- Rcom was the 7th largest weightage in Nifty is no more part of it. Even Unitech was at the 16th place.
- RCOM at 4.17% then had a higher weightage than – L&T/INFY/TCS/HDFC/ITC/WIPRO/HDFCBANK
- Unitech had a higher weightage than HDFC BANK !!!!
- ONGC the 2nd largest weightage on Nifty is now at the 21st place. From 7.13% to 1.35%.
- Banks and Financials had a weightage of 14.17% in 2008 is now at 35.03%. This is the biggest change !!
In the last 10 years the Nifty50 has changed amazingly in terms of constituents and the weightages assigned to it.
The big change is the Banking and Financial Weightage Change with a 35% weightage.
How do you Value a Nifty 50 on P-E Basis when 35% of Nifty 50 i.e Banks and Financials are Valued on a Price to Book Basis ?
Rest there can be more observations if you go through the weightages. All the data of weightages can now be easily downloaded from www.niftyindices.com