An Initiative of Team Central

Best returns are typically on Best returns are typically on investments made in bad times !!!investments made in bad times !!!

The Time is NOW !!!!The Time is NOW !!!!

An Init

iati

ve o

f Team

Centr

al

Rule for Investing…!!!!

The Basic Rule of Investing : “ To buy when the valuations are attractive

and to sell/not buy when they are not.”Investor’s Investment Pattern :

Although the rule is very logical it is seen that majority of investors, especially when it comes to equities end up buying at higher prices and selling/ not buying at lower prices !!!!

An Init

iati

ve o

f Team

Centr

al

Investor’s Investment Pattern - Equity

When the market was low – net inflow in equity is negative i.e. investors were selling equities. Whereas the inflow was at peak when markets were all time high !!!!! and has again fallen sharply in line with the market correction… Eg., in CY2002 when Sensex was around 3200 levels, inflow into equity MF were Rs 4517 Crs Whereas in CY2007 when Sensex was inrange of 14000 to 20000 inflow in equity MF were as high as

Rs 1,07,189 Crs.

Believe it or not, but investors were far more willing to buy equities at higher rather than lower prices !!!!!!!

An Init

iati

ve o

f Team

Centr

al

Investor’s Investment Pattern - Gold

There is a sharp contrast in the investor behaviour while investing in Gold as compared to that in equity…

Demand for Gold increases when gold prices are lower !!!! And relatively remains stagnant/falls when price rises……

An Init

iati

ve o

f Team

Centr

al

Contrasting Behaviour in Gold & Equity

People buy more Gold when it is cheaper and less when it is expensive !!!

It is the same set of people who actually buy more equities at higher prices and avoid them at lower prices!!!!!!!

Isn’t it interesting ???

An Init

iati

ve o

f Team

Centr

al

Reason for Contrast – Time Horizon

Gold is not bought with a view of selling it in near future

We rarely sell Gold hence people are not worried about further fall in prices of Gold in short terms

Infact with further fall in prices more Gold is purchased as it becomes even cheaper !!!!!

Similarly when prices go up, demand is reduced because it is perceived to have become expensive.

Equity is associated with short term investment, short term gain/losses

Therefore NAV/prices are seen everyday

Feeling generated is the falling prices would further fall and the rising prices would continue to keep rising….

Thus fear of losses or prospects of gain in short run, lead many not to invest in the down market and to invest in the rising market !!!!!

An Init

iati

ve o

f Team

Centr

al

How many of us are aware of the today’s value of the Gold holdings in our own house ?

If no, then why track the NAV – daily ????Such investment strategy is unlike to

generate decent returns over a long runIn fact for some it can be –

“DISASTROUS”“DISASTROUS”

A Question to self !!!

An Init

iati

ve o

f Team

Centr

al

Equities – A Superior Class !!!

Equities have given significantly higher returns than Gold in the past !!!!! Inspite of recent correction the returns for Investments Equity for 20 years is

17.16% pa as compared to Gold’s return @ 9.62% pa !!!! Rs 100 invested in both Gold and Sensex 20 years back would be now

Rs 2375 in case of Sensex & Rs 628 in case of Gold

An Init

iati

ve o

f Team

Centr

al

Sharp fall in market – An Opportunity ?

Currently the equity markets have fallen ~ 30% YTD !!!! This is neither the first or the last fall the equities will experience !!!! Equity is a volatile asset class for short to medium term Investors need not fear volatility (just as in case of Gold) The fall due to problem in economy is temporary in nature….. Fall in the market should be looked as an opportunity to buy more… As it allows us to buy the same assets at cheaper rates !!!!!

An Init

iati

ve o

f Team

Centr

al

An Init

iati

ve o

f Team

Centr

al

Current Scenario and Challenges !!

With 30% fall in market from Jan 2008, fwd P/E have fallen sharply and are now at reasonable levels…

An Init

iati

ve o

f Team

Centr

al

Bargain Valuations available only in challenging times !!!!

Key is to figure out whether challenges are temporary or long lasting

The current challenges faced by Indian Economy largely due to Simultaneous spike in oil and steel prices Inflation, higher interest rates, High fiscal and current account deficits etc.

Over the time this would get resolved Either would be passed to the consumers Or the prices would come down Or both

Once this happens, Inflationary pressures, interest rates, deficits are likely to moderate, growth

rates should improve and market should follow !!!!!!!!!!!!

An Init

iati

ve o

f Team

Centr

al

The current challenges faced by Indian Equity Market is also due to the sentiment loss because of

FII have withdrawn their Capital around 34000 Crs from the Indian Equity Market

Market may further see a correction @ 10% As against only Life Insurance Companies have invested over 55000 Crs

in the Equity Market Some other bodies investing in Indian Market being MF houses,

Corporate houses, Brokers & Traders, HNI and retail investors etc As a result the fundamentals are very strong and the lost sentiment can

be regained soon… As a result demand will suddenly shoot up And market will cross 15000 level while we keep waiting for correction and

we’ll have no time left to invest and get benefited.

Bargain Valuations available only in challenging times !!!!

When the valuations are high, prices are low…..When the valuations are high, prices are low…..

If not now then when shall you buy !!!!If not now then when shall you buy !!!!

An Init

iati

ve o

f Team

Centr

al

Recommended Course of action !!!!

Evaluate your current asset allocation Figure out what percentage of wealth you can put asides in equities Have a medium – long term approach (min 5 years)-The only reason why

insurance companies suggest a free surrender after 5 years as if you take any block of 5 years it is always given a positive returns at around 19% pa

Invest in diversified equity fund and benefit from professional management and portfolio diversification !!!

Finally, be patient. Stay the course !!!!

An Init

iati

ve o

f Team

Centr

al

Conclusion

Perceived risk and actual risk seldom go hand in hand !!!!! While in Jan 2008, at index levels of 21000 the perceived risk was low Whereas the actual risk high !!! Now after the sharp fall in the markets The risk reward of equity investments in India has improved remarkably compared to Jan

2008 The perceived risk is high, whereas the actual risk is low!!!!

India’s long term secular growth story remains intact Despite challenges in the short term, India remains the 2nd fasted growing economy in the

world Huge local markets, favourable demographics, high saving rates and rising salaries driving

domestic consumption, underlying strong capex cycle and several large scale projects, the economy should continue to remain one of the fastest growing economy’s in the world for a number of years in the future

In view of the above Ignore the overall pessimistic environment and invest Investments made at these levels should generate above average / attractive returns over

medium to long term !!!!!!!!!!

Best returns are typically on investments made in bad times !!!

An Init

iati

ve o

f Team

Centr

al

Happy Selling…!!!!!Happy Selling…!!!!!