Download - E quity M arket I nsights
1Sundaram BNP Paribas Tax Saver Sundaram BNP Paribas Asset Management1www.sundarambnpparibas.inwww.sundarambnpparibas.in Sundaram BNP Paribas Asset Managementwww.sundarambnpparibas.in
SIP
SIP
Equity Market Insights
Sundaram SKORe
Sundaram Keys to Optimum Returns
An Investor Education Initiative
2Sundaram BNP Paribas Tax Saver Sundaram BNP Paribas Asset Management2www.sundarambnpparibas.inwww.sundarambnpparibas.in Sundaram BNP Paribas Asset Managementwww.sundarambnpparibas.in
SIP
SIP Annual returns 17.6% for equity index
Figures as of July 2008; Data Source: Bloomberg; Analysis: In house
0
5000
10000
15000
20000
25000
Apr-79
Dec-80
Nov-82
Aug-84
May-86
Jan-88
Sep-89
Jun-91
Mar-93
Sep-94
Mar-96
Sep-97
Feb-99
Jul-00
Dec-01
May-03
Sep-04
Feb-06
Jul-07
First Major Bull Market
22% one-day decline in US, no
linkage thenHarshad Mehta
Scam
Asian Crisis; Unaffected
Tech bull market &
bust
Start of five-year
bull market
All time high & correction begins
BSE Sensitive Index
Deep corrections do not matter for long-term investors
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SIP
SIPAverage Sensex levels for five-year blocks
Figures as of July 2008; Data Source: Bloomberg; Analysis: In house
0
2000
4000
6000
8000
10000
12000
Apr-79
Dec-80
Nov-82
Aug-84
May-86
Jan-88
Sep-89
Jun-91
Mar-93
Sep-94
Mar-96
Sep-97
Feb-99
Jul-00
Dec-01
May-03
Sep-04
Feb-06
Jul-07
1979–1984: 183 1984–1989: 480
1989–1994: 1876
1994–99: 3568 1999–2004: 3998
2004–2008 YTD: 11,078Average index level over 29-+ years: 3640
Almost 25 years of close to or below long-term average
Inde
x Le
vels
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SIP
SIPBuild up of annual returns over the years
Figures as of July 2008; Data Source: Bloomberg; Analysis: In house
-5
0
5
10
15
20
25
30
Dec-79
Dec-81
Dec-83
Dec-85
Dec-87
Dec-89
Dec-91
Dec-93
Dec-95
Dec-97
Dec-99
Dec-01
Dec-03
Dec-05
Dec-07
Lowest level of annual returns over 25 years: 14.6%
Long-term average over 29 years: 17.6%
5Sundaram BNP Paribas Tax Saver Sundaram BNP Paribas Asset Management5www.sundarambnpparibas.inwww.sundarambnpparibas.in Sundaram BNP Paribas Asset Managementwww.sundarambnpparibas.in
SIP
SIP Volatility of returns reduces over time
-30
-15
0
15
30
45
60
75
90
3 years 5 years 10 years 15 years 20 years
• Height of each bar shows the range of returns. Smaller the range shown by the bar, the better for investors
• Longer the time frame, the greater is the reduction in risk without an impact on returns
High 81.7 53.0 34.7 27.8 21.1
Low -15.5 -7.0 -2.1 7.7 13.7
Average 19.9 18.5 17.2 17.2 16.9Data Source: Bloomberg; Analysis: In house using
SKORe as of July 31, 2008
Effective Annual
Returns %
Retu
rns
%
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SIP
SIP Benefit of discipline long-term investing
114
44
127
22
Alwaysinvested
Missed 10 BestDays
Missed 20 BestDays
Missed 30 BestDays
Missed 40 BestDays
Value now of Re 1 invested in SENSEX over a 29-year period
Significant gains only if you had remained invested at all timesDaily Returns since launch to July 2008
Data Source: Bloomberg; Analysis: In house using
SKORe as of July 31, 2008
Rs
Rs
RsRs
Rs
POWER OF COMPOUNDING ON BEST DAYS
7Sundaram BNP Paribas Tax Saver Sundaram BNP Paribas Asset Management7www.sundarambnpparibas.inwww.sundarambnpparibas.in Sundaram BNP Paribas Asset Managementwww.sundarambnpparibas.in
SIP
SIP Emphatic NO to market timing
Figures as of July 2008; Data Source: Bloomberg; Analysis: In house
Average annual return: 17.35%
Average annual return: 17.27%
No Market Timing
Market Timing
• More certain outcome
• Low risk
Average Annual Returns provided based on the analysis given in the next slide
• Close-to-impossible outcome
• High risk
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SIP
SIP
• Certain outcome over the past 29.3 years• Risk only in line with the market and no more
• Practical approach for every investor
Time matters, not timing
16.618.1 17.0 17.3
Highestvalue day
Lowestvalue day
Maximumgain day
Maximumloss day
Figures as of July 2008; Data Source: Bloomberg; Analysis: In house
One-timed investment every year (Rs 12000)
Amount Invested in Sensex: 3,52,000
Periodic investment every month (Rs 1000)
Amount Invested in Sensex: 3,52,000
One market-timed investment every year
69.4 96.2 77.4 83.0
CAGR %
17.4 17.3 17.3 17.4
1 5 10 20
Investment every month on specific dates
82.1 80.1 81.6 81.6
CAGR %
Value Rs
Lakh
Value Rs
Lakh
No Market TimingMarket Timing
DateDay
Probability of predicting each day every year
successfully is .0040 and over 29 years, almost no
chance – only more risk
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SIP
SIP Equity is the superior asset class to beat inflation
Asset Class Years
25 20 15 10 5
Sensex 16.7 15.2 14.5 20.0 22.4
Gold 6.6 8.4 11.3 17.1 22.7
FD 9.2 9.2 8.8 7.5 6.6
Bond yield 10.1 10.2 9.9 8.8 7.8
Inflation 6.7 6.8 5.8 5.1 5.6
Compounded annual returns based on investing Rs 1000-a-month
Figures as of July 2008Data Source: Bloomberg; Analysis: In house
Returns in %
Only equity outpaces inflation comfortably across time periods
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SIP
SIP Wealth creation in different asset classes
Asset Class Years
25 20 15 10 5
Investment 3.0 2.4 1.8 1.2 0.6
Equity 36.7 13.6 5.9 3.5 1.0
Gold 7.4 6.0 4.5 3.0 1.1
FD 11.8 6.8 3.7 1.9 0.8
Bond yield 14.1 7.9 4.1 2.0 0.8
Value in Rs lakh
Rs 1000-a-month invested over different time periods is now worth
Figures as of July 2008
Even after the deep correction in 2008, wealth creation in equity is significantly superior to other asset classes
Data Source: Bloomberg; Analysis: In house; Rs 1000-a-month invested n Equity is an investment made in Sensex
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SIP
SIP
Rs 1000 a-month investment till age 55
Portfolio value reckoned at age 60
Asset Allocation: Equity 70% and Fixed Income 30%
Returns based on historical average. In the equity, based on the Sensex and in the Fixed income, based on the government bond yield
Returns assumed 15.3%
Start early to reap maximum benefits
155.4
71.6
32.5
14.35.8 1.8
25 years 30 years 35 years 40 years 45 years 50 years
Data Source & Analysis: In house
3.6 3.0 2.4 1.8 1.2 0.6
Starting age of investing
Value in Rs lakh
From age 25, Rs 1000-a-month could deliver Rs 1.55 crore at age 60
Amount Invested at Rs lakh
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SIP
SIPEarly start also means more by way of gains
Starting Age
Year of investing
Amount Invested
Value of investment
Share Cost
Share Gain
Years Years Rs Lakh Rs Lakh % %
25 30 3.6 155.4 2.3 97.7
30 25 3.0 71.6 4.2 95.8
35 20 2.4 32.5 7.4 92.6
40 15 1.8 14.3 12.6 87.4
45 10 1.2 5.8 20.7 79.3
50 5 0.6 1.8 32.5 67.5
Data Source & Analysis: In houseThe returns and values are indicated and not assured
Early Start
Late Start
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SIP
SIP
SIP period in months 12 36 60 120
% of SIP with positive returns 68 82 86 91
% of SIP with negative returns 32 18 14 9
Average annual returns 11 13 15 19
Multiple benefits for longer SIP periods
Data Source: Bloomberg; Analysis: In house using
SKORe as of July 31, 2008
Risk-return profile for SIPs over different periods in Sensex
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SIP
SIPImportance of investing in difficult phases
Analysis based on Rs 1000-a-month SIP between 1997-2006
Daily Returns since launch to July 2008
Period Nature of Market Share in Wealth (%)
Average Sensex
1997 Lackluster, Poor Depth 11.5 3774
1998 Lackluster, Poor Depth 13.0 3356
1999 Lackluster, tech boom starts 11.0 3990
2000 Tech-led boom & bust 9.4 4637
2001 Lackluster, Poor Depth 12.4 3519
2002 Lackluster, Poor Depth 13.3 3241
2003 Lackluster First Half 11.7 3789
2004 Bull market continues 7.8 5535
2005 More strength to bullish phase 6.0 7313
2006 Bullish Phase 3.8 11345
Data Source: Bloomberg; Analysis: In house
About 75% of wealth creation attributable to investing during tuff times
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SIP
SIP Periodic Table of Investment Returns
1Diversified Fund
26.7
2CNX Mid Cap
20.2
3BSE 200
18.7
4BSE 100
18.6
5MSCI India
17.9
6Nifty
17.2
Figures as of July 2008; Data Source: Bloomberg; Analysis: In house
Diversified equity funds outpace indices comfortably over ten years
7Sensex
16.7
8Nifty Junior
16.4
9CNX 500
15.9
10MSCI EM
13.3
11Gold
12.3
12I-SEC Bond
10.0
RANK
RANK
1999-2008 YTD
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SIP
SIP Periodic Table of Investment Returns
Analysis: Sundaram BNP Paribas Asset Management; Methodology: www.sundarambnpparibas.in
Diversified equity funds: most top quartile presence & absent in 4th quartile
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SIP
SIP Periodic Table of Investment Returns
Figures as of July 2008; Data Source: Bloomberg; Analysis: In house
Diversified equity funds and mid cap stocks dominate top end
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SIP Contact us
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