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Sections

• Lets look at the Past? – Should Investors be unhappy?

• Equity Markets – A SWOT Analysis

• Future of Equities…

• How does asset allocation help your portfolio?

• Should you invest in hybrid funds?

• Which option to choose? – Dividend or Growth

• How to build a pension plan for your investor and yourself?

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The reality is very different from the perception

• The investor has lost money in equities

• Equities have not generated returns

• The investor has made more money in fixed deposits

• Equities have no hope in future

• Investors have made money in equities

• Equities have generated returns in line with expectations

• A portfolio of well diversified stocks has out-performed

• The future is geared for equities

Myths Reality

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Odds of making money over 1 year period are mixed

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However, longer holding periods have yielded predictable returns

Summary since March 31, 1979

Time Period

1 year 3 years 5 years 7 years 10 years 12 years 15 years

Yearly Rolling Return Observations 32 30 28 26 23 21 18

Negative Return Observations 11 6 3 3 1 0 0

Loss Probability 34% 20% 11% 12% 4% NIL NIL

Median Return (%) 16 15 18 19 18 15 15

Average Return (%) 27 19 18 18 17 17 16

Max Return (%) 267 82 53 43 35 34 27

Minimum Return (%) -47 -15 -5 -2 -2 2 6

Standard Deviation (%) 56 21 15 11 9 8 5

Data as on March 31, 2013

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Equity is a slave of corporate earnings

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Stock performances vary hugely over time – the key is to identify the right business

Sustainable business performance is the driver of stock returns

Investment process has to capture all factors that can impact a stock

Actual performance can be far away from the average

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A well diversified portfolio will always outperformName of the Company 5 Year CAGR Beta

Sun Pharmaceutical 22 2TCS 21 1.7

Mahindra & Mahindra 20 0.8ITC 19 1.8

UltraTech Cement 18 2.1HDFC Bank 17 1

Hindustan Unilever 16 2.3Tata Motors 15 0.1

Kotak Mahindra Bank 14 0.7Axis Bank 13 0.4

HDFC 12 0.9Indian Oil Corp. 11 2.2

ONGC 10 1.4State Bank of India 9 0.5

ICICI Bank 8 0.2Infosys 7 1.1Wipro 6 1.6

Larsen & Toubro 5 0.3Cairn India 4 1.2

NTPC 3 1.3Bharti Airtel 2 1.5

Reliance Industries 1 0.6Coal India 0 1.9Average 11 1.2

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Clear positioning and stock selection are key to our schemes

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Mutual Funds have delivered in line with the markets

Fund Type

1 Year Returns 3 Year Returns 5 Year Returns

Average Best Fund Worst Fund Average Best Fund Worst Fund Average Best Fund Worst Fund

Equity: Large & Mid Cap 19.98 30.44 3.58 5.93 11.67 -3.6 5.85 12.77 -16.87

Equity: Large Cap 21.07 31.64 2.4 6.62 11.62 1.64 5.24 14.31 -2.05

Equity: Mid & Small Cap 15.48 30.13 -6.71 5.36 18.71 -6.65 6.58 16.04 -7.24

Equity: Multi Cap 18.64 31.54 4.18 5.07 9.91 0.73 7.08 12.68 4.04

Equity: Tax Planning 19.72 28.54 -4.03 5.74 13.12 -10.33 4.94 12.76 -8.63

CNX Nifty 23.63 - - 6.73 - - 4.59 - -

S&P BSE Mid Cap 9.48 - - -0.94 - - -0.66 - -

S&P BSE Sensex 23.51 - - 6.31 - - 4.24 - -

S&P BSE Small Cap -4.41 - - -10.32 - - -5.95 - -

Hybrid: Equity-oriented 17.21 26.44 1.45 7.14 13.18 -0.9 7.27 13.38 0.65

Debt: Income 13.49 17.21 8.43 9.22 12.06 6.58 8.66 12.31 4.24

Debt: Short Term 10.85 13.02 8.43 8.7 10.68 5.66 8.37 10.09 4.35

Debt: Ultra Short Term 9.13 12.03 2.44 8.48 10.08 3.44 7.61 9.02 3.58

Gold: Funds -10.19 -8.93 -11.01 10.7 10.93 10.5 14.24 14.43 14.04

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Axis Mutual Fund stands tall

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But investors have lost money in equities

• There are many reasons which we know but do not rectify– Investing in direct equity without research and understanding

– Chasing “the fashionable scheme” in mutual funds

– Not staying invested

– Etc., etc., etc.

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Fixed Income Vs. Equity – What should you choose?

• Both are important as asset allocation tools

• Key metric for tactical allocation can be yields generated from the asset class

• 10 Year G-Sec Yield – 7.40%

• EPS of Sensex – 1368

• Hence P/E = 20000 / 1368 = 14.62

• Yield of the equity market – 100 /14.62 = 6.84%

• Growth of 15% for the year – 6.84% becomes 7.86%

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Summary

• Equities are predictable for long term – short term gain is good luck and short term loss is bad homework

• Outlook on equities cannot be based on market levels– Sensex at 6000 can be highly valued and at 20000 can be cheap

• Selection of the right investment avenue is key – investment philosophy and process is more

• Understanding risk and reward is the key to investment success

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Lets play a game

• Amount Invested – Rs. 100– Month 1 return + 10%, Month 2 return -10%, Month 3 return

+10%, Month 4 return -10%, Month 5 return +10%, Month 6 return -10%, Month 7 return +10%, Month 8 return -10%, Month 9 return +10%, Month 10 return -10%, Month 11 return +10%, Month 12 return -10%

• What will be the amount at the end of the year?

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Warren Buffet says

• Rules of Investing

• Rule No. 1– Never lose money

• Rule No. 2– Never forget rule no. 1

• Any portfolio wherein all components go up or down in value at the same time is not diversified

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Consistent positive returns ensure steady wealth creation

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While asset allocation is important, rebalancing is the key

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But what about Gold?

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Equities are powerful, but volatile in nature

This is historical data for the period Dec 1994 to Jun 2012. Past performance may or may not be sustained in the future. Stocks are represented by the S&P CNX Nifty and Bonds by the I-Sec Sovereign Bond Index. Triple Asset comprises of Stocks, Bonds and Gold weighted equally and rebalanced monthly. Triple Asset is a simulated portfolio. Source of data: Bloomberg.

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Reducing the fall aids in higher gains over time

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Diversification through 2 or 3 asset classes?

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Bonds preserve capital, but create limited wealth

This is historical data for the period 1 Jan 2002 to 31 Dec 2012. Past performance may or may not be sustained in the future. Triple Asset comprises of Stocks, Bonds and Gold weighted equally and rebalanced monthly. In the Triple Asset, stocks are represented by the S&P CNX Nifty and bonds by the I-Sec Sovereign Bond Index. Triple Asset is a simulated portfolio. Source of data: Bloomberg.

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Which Option to Choose – Dividend or Growth?

Amount Invested (Rs.) 1,000,000NAV as on Date of Investment (Rs.) 10

Units purchased 100,000.00NAV 1 Year later 10.80

Scenarion under Growth Option Dividend Option

Gain 80,000 80,000Dividend Distribution Tax 28.32%

Tax Paid (Rs.) 17,655.86Withdrawal / Dividend per month (Rs.) 6,667 5,195

Annual Withdrawal / Dividend (Rs.) 80,000 62,344Units redeemed (ann. Withdrawal / latest NAV) 7,407.41 -Capital Gain (Rs.) (diff in NAV* units redeemed) 5,925.93 -

Short Term Capital Gains Tax Rate 30% 30%Short Term Capital Gain Tax Paid (Rs.) 1,778 -

Exit Load paid (1% for 1 year for amount withdrawn) 800.00 - Net Amount in Hand 77,422.22 62,344.14

(Ann dividend / withdrawal - all taxes - exit load) Difference of Growth Option - Dividend Option 15,078.08

Difference as a % of Investment 1.5%

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Even then, Dividend is better than FDs

Traditional Fixed Income Instruments Fixed Income Mutual Funds

Amount Invested 1,000,000 1,000,000

% Return 10.00% 10.00%

Absolute Return 100,000 100,000

Tax Rate 30.90% 28.33%

Tax 30,900 2,073

Net Return 69,100 77,927

Net return % 6.9% 7.8%

Difference 0.88%

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Axis Triple Advantage Fund – An easy method is build a pension plan

For your investor

Build a Pension Plan with Axis Triple Advantage Fund

And

Ensure a Pension Plan for You

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Axis Mutual Fund stands above the rest