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 is the comprehensive
mix of Asset, Debt, Tax, and Risk Management
Strategies into one single Financial solution.

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“ I can calculate the motions of the Heavenly
bodies but not the movements of the Stock
market.”

- Sir Isaac Newton

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There is a common saying on the bourses:

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 What is the Average Age
Let us begin with a little quiz
when one starts Earning?

25 Years

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 What is the Average Retirement Age?

60 Years

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 What is an Average Income of an
Middle-Class House-hold?

Rs.25,000/- p.m.

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 How much can a person
save on a regular basis?

Rs.5,000/- p.m.

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 If a person can save Rs.5,000/- per month
What will be his wealth when he retires?

Assuming:
He increases his investments by 5% every year
Invests in an Asset class that gives returns of 20%

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 At Age 60 his wealth would have been

Rs.27 Crores

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 THE TRUTH

Creating Wealth is Easy

We can all be Wealthy

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 How can you create wealth?

Start Saving Early

The longer you save, the more you make

Save in the Right Asset Class

This will dictate how much wealth you create …

Save Regularly
Even a small amount saved regularly, is good

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 Starting Early
27 Crores*

Ram Shyam
Savings Starting Age 25 40

Savings - Monthly SIP Rs.5,000/- Rs.15,000/-

Saving Years till age 60 35 years 20 years

4.90 Crores*
Total Amount Saved (appx.) Rs.57 lacs Rs.62 lacs

Give time to your investments rather than

timing

25 years 40 years 60 years

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Assumptions: (a) Savings grows at 5% annually (b) Returns assumed at 20% CAGR
 Selecting Right Asset Class

6,000 Equity market (represented by BSE Sensex) has outperformed

all other investment avenues Sensex
5,000
Company Bank
4,000
Deposits Deposits
3,000

2,000 Inflation

1,000
Gold
0
1990- 1991- 1992- 1993- 1994- 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

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 Past Performance (BSE Sensex)

Year Sensex Investment Rs.

1979 100 1,00,000

2013 20000 2,00,00,000

In past 34 years BSE Sensex has given about 17% returns

This is in spite of …

• Two wars • At least 3 recessionary periods

• At least three major financial scandals • 10 different governments and
• Assassination of 2 prime ministers • An unfair share of natural disasters

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 Save Regularly
Disciplined Investing through Systematic Investment Plans (SIPs) is the
ideal way to reduce risk

Twin Benefits of Investing Regularly

Average Purchase cost

Rupee Cost Averaging
will be less
At higher prices – less units
Automatic Timing
At lower prices – more units

Rising Market Falling Market

Market Units Purchased Units Purchased Market

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 Wisdom

• The Right way to create wealth …

Buying potential big winning stocks

Successfully timing the markets
X
Following Expert Advisors recommendations
X
Saving a lot of money
X
X
• Wealth can be successfully created if we just follow the three basic
principles ...

Starting early and saving for long

Investing in the right asset class
Investing Regularly – big or small

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 WHY INDIA ?

WHY EQUITY ?

WHY MUTUAL FUNDS ?

WHY NOW ?

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 Benefiting from Growth
How India’s Growth will drive Profits of Companies?

Households We have already seen India’s

growth potential.

Consumption
The corporate profit growth is
directly to the economic growth
Sales
The corporate profitability growth
can be guessed from the ‘nominal
Profits
economic growth’ …

Production In India we can take it at around

13% … for good companies, we
can assume the growth of around
Factor Payments 15% or above

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Relationship – Price to Earnings

• If Earnings Grow prices have to grow WHY ???

For e.g. EPS of Infosys in 1998 was 18.28 &

Market price was 457.00

P/E of Infosys was Price / EPS = 457/18.28 = 25

Earnings Yield of Infosys =18.28*100/457 = 4%

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Relationship – Price to Earnings

The EPS of Infosys has grown to 170 in 2004.

If the price doesn't grow, then,

P/E of Infosys would be 457/ 170 = 2.68 &

Earnings Yield would be 170*100/457 = 37.19%

Such a high earnings yield is so attractive that the price of Infosys

has to increase. HENCE if earnings grow prices have to GROW

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 Infosys Price Movement
Positive
Sentiments

INFOSYS PRICE MOVEMENT

Growth in Growth in Earnings
Price EPS Period P/E
EPS Price Yield
Mar- 98 457 18.28 4.00 25

Mar- 00 8902 38.70 1998-00 45.51% 341% 0.43 230

Mar- 04 4938 170.28 2000-04 44.83% - 17.83% 3.45 29

1998-04 4 5.05% 4 8.69%

Growth in Earnings & Growth in Prices matches in long run

Negative
Sentiments
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 Relationship
Proof: Equity in Long Term is function of corporate profitability

BSE Sensex Vs Earning

Sensex Sensex
Months
Value Earnings
Feb-91 1,220.41 66.18 BSE SENSEX

Feb-08 17,578.72 790.77 SENSEX Earnings

BSE Sensex

16.99% 15.71%
Jan-91

Feb-92

Feb-93

Feb-94

Feb-95

Feb-96

Feb-97

Feb-98

Feb-99

Feb-00

Feb-01

Feb-02

Feb-03

Feb-04

Feb-05

Feb-06

Feb-07

Feb-08
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 Benefiting from Growth
Proof: Strong Earnings of Indian Companies

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 Indicators for Equity Investment
• Corporate profitability has been rising at impressive growth due to better
higher consumption, cost competitiveness, benign interest rates,
increasing presence in world market, etc
• Sound banking system with a network of 70,000 branches, among the
largest in the world
• Favorable Tax structure (LTCG Zero and STCG @10%, Dividend tax
free)
• Corporatisation of Indian stock exchanges
• India has one of the world's lowest transaction costs based on screen-
based transactions and paperless trading
• According to Morgan Stanley Research, trading volumes are expected to
double to $3.2 trillion in 2010 from about $1.6 million currently
• No. of FIIs increased to 1030 in 2006 from 814 in 2005
• Earning growth is among highest in the Asia-Pacific region

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PERFORMANCE OF BSE SENSEX - Equities not risky in long run
2 31-Mar-81 173.44 34.90% 100.00
3 31-Mar-82 217.71 25.52% 29.61%
4 31-Mar-83 211.51 -2.85% 18.05%
5 31-Mar-84 245.33 15.99% 12.25% 19.66%
6 31-Mar-85 353.86 44.24% 17.58% 22.44%
7 31-Mar-86 574.11 62.24% 39.49% 27.05% 28.36%
8 31-Mar-87 510.36 -11.10% 27.66% 18.58% 21.77% As Time Increases
9 31-Mar-88 398.37 -21.94% 4.03% 13.50% 12.61% Volatility & Range
10 31-Mar-89 713.60 79.13% 7.52% 23.81% 18.48% 21.72% Decreases
11 31-Mar-90 781.05 9.45% 15.24% 17.16% 20.52% 19.77%
12 31-Mar-91 1167.97 49.54% 43.12% 15.26% 24.97% 21.01% 22.73%
13 31-Mar-92 4285.00 266.88% 81.76% 53.04% 42.80% 34.71% 33.94%
14 31-Mar-93 2280.52 -46.78% 42.93% 41.76% 21.78% 26.84% 23.95%
15 31-Mar-94 3778.99 65.71% 47.90% 39.57% 33.11% 31.45% 26.85% 27.40%
Harshad
16
Mehta
31-Mar-95 4,285
3260.96 -13.71% -8.70% 33.09% 35.03% 24.87% 25.60% 24.05%
17 31-Mar-96 3366.61 3.24% 13.86% 23.58% 24.81% 19.35% 24.39% 21.86%
18 31-Mar-97 3360.89 -0.17% -3.83% -4.74% 23.18% 20.74% 20.63% 20.02%
19 31-Mar-98 3892.75 15.82% 6.08% 11.29% 18.77% 25.60% 17.29% 21.43%
20 31-Mar-99 3739.96 -3.92% 3.57% -0.21% -1.92% 18.02% 18.05% 19.92%
21 31-Mar-00 5001.28 33.73% 14.17% 8.93% 11.87% 20.40% 23.47% 19.31%
22 31-Mar-01 3604.38 -27.93% -2.53% 1.37% -0.67% 11.93% 14.45% 13.03%
22Tech31-Mar-02
Boom 5,001
3469.35 -3.75% -2.47% 0.64% 0.89% -2.09% 13.23% 13.63%
22 31-Mar-03 3048.72 -12.12% -15.21% -4.77% -1.41% 2.95% 8.32% 14.53%
23 31-Mar-04 5590.60 83.38% 15.76% 8.37% 7.54% 3.99% 2.24% 14.71%
24 31-Mar-05 6492.82 16.14% 23.23% 5.36% 7.58% 7.13% 9.11% 15.16%
25 31-Mar-06 11279.96 73.73% 54.67% 25.63% 17.08% 12.85% 9.54% 16.32%
26 31-Mar-07 13,072.10 15.89% 32.73% 30.38% 14.71% 14.55% 12.27% 7.72%
Probability of Loss 10/28 5/26 3/24 3/22 1/19 0/17 0/14
Average Returns 27.85% 19.94% 17.95% 17.36% 17.67% 18.00% 17.79%
Probability of Loss (%) 35.71% 19.23% 12.50% 13.64% 5.26% 0.00% 0.00%
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 MF Equity Schemes performed better than Index

Average Performance of selected Equity Schemes - Equities not risky in long run
Rolling Returns - Growth
Years YEAR END 1 year 3 years 5 years 7 years 10 years 12 years
0 31-Mar-94
1 31-Mar-95 35.04%
2 31-Mar-96 -23.17%
3 31-Mar-97 -16.22% -9.85%
4 31-Mar-98 24.18% -12.69% Better Performance
with Lesser
5 31-Mar-99 54.29% 15.72% 9.71%
Probability of loss
6 31-Mar-00 91.87% 53.31% 17.19%
7 31-Mar-01 -38.95% 21.19% 12.49% 10.17%
8 31-Mar-02 31.14% 14.91% 23.21% 9.19%
9 31-Mar-03 11.74% -4.21% 20.58% 14.57% Average of 5
equity schemes
10 31-Mar-04 146.24% 53.02% 32.79% 33.81% 20.15%
with the required
11 31-Mar-05 40.36% 56.56% 24.69% 36.31% 20.34% history taken
12 31-Mar-06 82.73% 84.63% 55.68% 39.97% 32.13% 25.36% 1)Franklin India Bluechip
2)Franklin India Prima
13 31-Mar-07 7.73% 40.04% 49.66% 28.89% 33.98% 19.04% 3) Reliance Growth
4) Reliance Vision
Probability of Loss 3/13 3/11 0/9 0/7 0/4 0/2 5) HDFC Equity
Average Returns 34.38% 28.42% 27.33% 24.70% 26.65% 22.20%
Probability of Loss (%) 23.08% 27.27% 0.00% 0.00% 0.00% 0.00%

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 Equity Investing
Direct Investing In-direct Investing - MF

• Relatively high investment • Very low investment

amount needed amount needed (SIP of
Rs.100/-)
• Lack of expertise
• Inadequate information • Professional Expertise
on time – Full time Fund Mngt. team
• Full time job!! – High quality & timely info
• Higher risks • Lower of Risks due to
• High Transaction Costs diversification
• Dependence on Brokers • Low transaction costs
… who have their own
agenda! • Many other advantages

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 Give Time rather than Timing the Equity market

Investing in the BSE Sensex –

25 years
16.90%
15.07% 16.02%02%

Fixed investment at Fixed investment at Fixed investment on

highest sensex value lowest sensex value 1st day of every month
every year every year

Market timing does not matter over the long term

Data source: ICRA MFIE
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