Equity Market Insights

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Equity Market Insights
Sundaram SKORe
Sundaram Keys to Optimum Returns
An Investor Education Initiative
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Annual returns 17.6 for equity index
BSE Sensitive Index
Deep corrections do not matter for long-term
investors
Figures as of July 2008 Data Source Bloomberg
Analysis In house
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Average Sensex levels for five-year blocks
Index Levels
Almost 25 years of close to or below long-term
average
Figures as of July 2008 Data Source Bloomberg
Analysis In house
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Build up of annual returns over the years
Long-term average over 29 years 17.6
Lowest level of annual returns over 25 years
14.6
Figures as of July 2008 Data Source Bloomberg
Analysis In house
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Volatility of returns reduces over time

• 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

Returns
Effective Annual 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 16.9
Data Source Bloomberg Analysis In house using
SKORe as of July 31, 2008
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Benefit of discipline long-term investing
Value now of Re 1 invested in SENSEX over a
29-year period
Rs
POWER OF COMPOUNDING ON BEST DAYS
Rs
Rs
Rs
Rs
Significant gains only if you had remained
invested at all times
Daily Returns since launch to July 2008
Data Source Bloomberg Analysis In house using
SKORe as of July 31, 2008
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Emphatic NO to market timing
Average Annual Returns provided based on the
analysis given in the next slide
No Market Timing
Average annual return 17.35

• More certain outcome
• Low risk

Market Timing
Average annual return 17.27

• Close-to-impossible outcome
• High risk

Figures as of July 2008 Data Source Bloomberg
Analysis In house
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Time matters, not timing
No Market Timing
Market Timing
Periodic investment every month (Rs 1000) Amount
Invested in Sensex 3,52,000
One-timed investment every year (Rs 12000) Amount
Invested in Sensex 3,52,000
Value Rs Lakh
Value Rs Lakh
69.4 96.2 77.4 83.0
82.1 80.1 81.6 81.6
CAGR
CAGR
Date
Day
One market-timed investment every year
Investment every month on specific dates
Probability of predicting each day every year
successfully is .0040 and over 29 years, almost
no chance only more risk

• Certain outcome over the past 29.3 years
• Risk only in line with the market and no more
• Practical approach for every investor

Figures as of July 2008 Data Source Bloomberg
Analysis In house
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Equity is the superior asset class to beat
inflation
Compounded annual returns based on investing Rs
1000-a-month
Asset Class Years Years Years Years Years
Asset Class 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
Returns in
Only equity outpaces inflation comfortably across
time periods
Figures as of July 2008
Data Source Bloomberg Analysis In house
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Wealth creation in different asset classes
Rs 1000-a-month invested over different time
periods is now worth
Asset Class Years Years Years Years Years
Asset Class 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
Even after the deep correction in 2008, wealth
creation in equity is significantly superior to
other asset classes
Figures as of July 2008
Data Source Bloomberg Analysis In house Rs
1000-a-month invested n Equity is an investment
made in Sensex
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Start early to reap maximum benefits
Value in Rs lakh
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
Starting age of investing
3.6 3.0 2.4 1.8 1.2 0.6
Amount Invested at Rs lakh
From age 25, Rs 1000-a-month could deliver Rs
1.55 crore at age 60
Data Source Analysis In house
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Early 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
Early Start
Late Start
The returns and values are indicated and not
assured
Data Source Analysis In house
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Multiple benefits for longer SIP periods
Risk-return profile for SIPs over different
periods in Sensex
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
Data Source Bloomberg Analysis In house using
SKORe as of July 31, 2008
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Importance of investing in difficult phases
Analysis based on Rs 1000-a-month SIP between
1997-2006
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
About 75 of wealth creation attributable to
investing during tuff times
Daily Returns since launch to July 2008
Data Source Bloomberg Analysis In house
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Periodic Table of Investment Returns
1999-2008 YTD
7 Sensex 16.7
8 Nifty Junior 16.4
9 CNX 500 15.9
10 MSCI EM 13.3
11 Gold 12.3
12 I-SEC Bond 10.0
1 Diversified Fund 26.7
2 CNX Mid Cap 20.2
3 BSE 200 18.7
4 BSE 100 18.6
5 MSCI India 17.9
6 Nifty 17.2
RANK
RANK
Diversified equity funds outpace indices
comfortably over ten years
Figures as of July 2008 Data Source Bloomberg
Analysis In house
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Periodic Table of Investment Returns
Diversified equity funds most top quartile
presence absent in 4th quartile
Analysis Sundaram BNP Paribas Asset Management
Methodology www.sundarambnpparibas.in
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Periodic Table of Investment Returns
Diversified equity funds and mid cap stocks
dominate top end
Figures as of July 2008 Data Source Bloomberg
Analysis In house
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Disclaimer Equity Market Insights is for
information purposes only. Equity Market Insights
should not be construed as prospectus, offer
document, offer, solicitation for an investment
or investment advice. Information in this
document has been obtained from reliable sources
in the opinion Sundaram BNP Paribas Asset
Management. Opinions expressed by authors may not
necessarily represent that of the organization.
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