Nifty 50, the leading benchmark index of National Stock Exchange, has on Monday achieved a historic milestone by surpassing 20,000-mark. This achievement follows a period of eager anticipation and market volatility, as the index came very close to reaching this milestone back in July. However, Nifty closed below the 20,000-mark on Monday at 19,996.35, marking its all-time high on closing basis.
Following the great financial crisis of 2008, Nifty has experienced a roller-coaster ride in its 14-year trajectory, starting from 2,700 points (in early 2019) and eventually reaching the historic milestone of 20,000 points on Monday. Let's explore the various challenges that Nifty encountered along the way and how it managed to recover and deliver stellar returns for investors.
A flash crash occurred on the National Stock Exchange (NSE) on a Friday morning due to erroneous trades made by a dealer involving 59 leading stocks. This incident led to a sharp 15.5% drop in the NSE-50 (Nifty) index, causing concerns about the exchange's software reliability and creating an embarrassing situation for the exchange just before a visit by the finance minister. By the end of the trading day, the Nifty recovered, closing at 5,747, down 41 points, while the Sensex closed 120 points lower at 18,938.
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On August 24, 2015, NSE witnessed a significant drop of 490 points, with the Nifty closing at 7,809 points. The primary reason cited for this downturn was the ripple effect caused by concerns about a slowdown in China. This concern stemmed from the devaluation of the Yuan two weeks earlier, which led to a depreciation in the currency rates of various other currencies and a rapid sell-off of stocks in both China and India. Analysts also pointed to additional factors contributing to the decline, including disappointing earnings reports from many Indian companies in the first quarter, cautious statements from their management, casting doubts on their recovery, and an unimpressive monsoon season that year.
On November 9, 2016, Nifty experienced a sharp decline of 541 points, reaching 8,002, primarily attributed to the Indian government's crackdown on black money. The significant selling was largely a response to the demonetisation initiative spearheaded by the Modi government.
While not officially labelled as a crash, the NSE witnessed a significant downturn on both February 2 and 5, 2018. This decline was triggered by the then Finance Minister Arun Jaitley's proposal in Budget to implement a 10% long-term capital gains tax (LTCG) on equity shares sold after a 12-month holding period. On February 5, the Nifty 50 index experienced a notable drop, shedding approximately 400 points and closing at 10,676.
From Nifty's perspective, 2020 was a tumultous year. On February 1, the presentation of the Union Budget triggered a Nifty drop of over 3% amid global concerns about the emerging coronavirus pandemic. Later, on February 28, growing global anxiety due to Covid caused Nifty to lose 432 points. In early March, Nifty faced more losses, and the crisis in Yes Bank added to market turmoil. By March 23, Nifty had plummeted by 12.98% to 7,511, reaching its lowest levels since 2016, as lockdowns and recession fears intensified amid the increasing number of coronavirus cases in India and worldwide.
Thanks to the substantial infusion of liquidity and quantitative easing by central banks worldwide, the NSE, along with numerous other global indices, embarked on an unrelenting rally that extended until February 2022. The NSE, which made a low of 7,511 during the Covid crash, skyrocketed to an astonishing 18,400 by the conclusion of October in 2021.
In February 2022, when Russia launched an attack on Ukraine, stock markets worldwide experienced a sharp decline. During this period, the Nifty, which had been trading within the range of 17,000 to 18,500, suffered a significant crash, dropping to 15,741. This decline was primarily attributed to weak global signals and the surge in oil prices resulting from sanctions imposed on Russia. Interestingly, India took a different stance by refraining from implementing sanctions and continued importing oil from Russia. This decision played a crucial role in stabilising the Indian economy during a period of uncertainty.
Despite banking turmoil in US and the looming spectre of a global recession, India's robust economic fundamentals and effective governance have continued to draw increased foreign investment. This trend was further accelerated by China's ongoing disinvestment initiatives amidst rising tensions and trade disputes with the United States. On September 11, 2023, the Nifty index achieved a historic milestone by surpassing the 20,000-mark, sending a powerful signal to global markets about India's emergence as one of the world's most resilient stock markets.