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E quity M arket I nsights Sundaram SKORe Sundaram Keys to Optimum Returns An Investor Education Initiative All time high & correction begins 22% one-day decline in US, no linkage then Start of five-year bull market Asian Crisis; Unaffected Harshad Mehta Scam Tech bull market & bust

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Equity Market Insights

Sundaram SKORe

Sundaram Keys to Optimum Returns

An Investor Education Initiative


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All time high & correction begins

22% one-day decline in US, no linkage then

Start of five-year bull market

Asian Crisis; Unaffected

Harshad Mehta Scam

Tech bull market & bust

First Major Bull Market

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 index level over 29-+ years: 3640

2004–2008 YTD: 11,078

1999–2004: 3998

1994–99: 3568

1989–1994: 1876

1984–1989: 480

1979–1984: 183

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 %

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

CAGR %

CAGR %

Date

Day

Investment every month on specific dates

One market-timed investment every year

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

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

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

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

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

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

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

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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Contact us

SMS: SFUND to 56767

Toll Free: 1800-425-1000

www.sundarambnpparibas.in

Call: 044 28578700

E-mail:[email protected]


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Disclaimer

Mutual fund investments are subject to market risks. Please read the offer document carefully before taking an investment decision. Risk Factors: All mutual funds and securities investments are subject to market risks, and there can be no assurance or guarantee that fund's objectives will be achieved. NAV may go up or down, depending on the factors and forces affecting the securities market. There is uncertainty of dividend distribution and risk of capital loss. Statutory: Mutual Fund Sundaram BNP Paribas Mutual Fund is a trust under the Indian Trusts Act, 1882 Sponsors (Collective liability is limited to Rs 1 lakh): Sundaram Finance Limited & BNP Paribas Asset Management. Investment Manager: Sundaram BNP Paribas Asset Management Company Ltd. Trustee: Sundaram BNP Paribas Trustee Company Ltd. Past performance of Sponsors//Asset Management Company/Fund does not indicate or guarantee future performance. General 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. The detailed disclaimer/disclosures/risk factors available at www.sundarambnpparibas.in must also be treated as an integral part of this communication.


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