Nifty unlikely to deliver positive returns for two years

An interesting "top-down" approach to assessing the likely long-term return from the Nifty would be as follows. The economy is expected to grow at between 7 per cent to 7.5 per cent of GDP in real terms in 2018-19. Inflation is expected to run at about 5 per cent to 5.5 per cent. That means nominal GDP growth will be about 12.5 per cent.

Equity earnings normally grow at a premium over nominal GDP growth. This premium is assumed to be around 3 per cent or so in India over the long-term. If we add that, EPS growth should average around