Why invest in Equities ?

Basic concepts-Kotak
Flow of the Presentation

> What are Mutual Funds?

> Advantages of Mutual Fund
> Some Basic Terms
> NAV
> Sale Price
> Repurchase Price
> Switching Facility
> Systematic Investment Plan (SIP)
> Reliance Mutual fund Basket Of Funds
> Reliance Vision Fund
> Reliance Growth Fund
> Reliance Equity Opportunities Fund
> Performance Of Reliance Equity Funds
> The Reliance Advantage
 What are Mutual Funds?

o A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities.

Source: www.amfiindia.com
Net Asset Value (NAV):
Net Asset Value or NAV of a Mutual Fund is the value of one unit of investment in the
fund,in NET ASSETS terms.

(MV of Investments+ Current Assets+Accrued

NAV= Income – Current Liabilities – Accrued Expenses)
Total Number of units outstanding

Sale Price:
It is the price paid by an investor when investing in a scheme of a Mutual Fund. This price
may include the sales or entry load.
> Load: The charge collected by a Mutual Fund from an investor for selling the units or
investing in it.
> When a charge is collected at the time of entering into the scheme it is called an Entry
load or Front-end load or Sales load.
> An Exit load or Back-end load or Repurchase load is a charge that is collected at the
time of redeeming or for transfer between schemes (switch). The exit load percentage is
deducted from the NAV at the time of redemption or transfer between schemes.

> Repurchase Price:

> It is the price at which an investor sells back the units to the Mutual Fund. This price is
NAV related and may include the exit load.

> Switching Facility:

> Switching facility provides investors with an option to transfer the funds amongst
different types of schemes or plans.
> Switching is also allowed into/from other select open-ended schemes currently within
the Fund family or schemes that may be launched in the future at NAV based prices.
 The rapidly changing India… FUTURE
 One of the fastest
growing economies
 State of art infrastructure

 Global scale of

operations
 International centre of

PRESENT excellence for most

skills
 Developing Economy
 Huge Infrastructure
PAST Investment
 Rising Aspirations…
 Under Developed
 Matched with improved
Economy
 Slow rate of growth confidence
 Bureaucracy

 Lack of infrastructure
 What would drive the future…

Avg GDP growth Slowing population

Rising literacy rate
heading northwards growth

1900-1950 1.0% 1951-1980 2.2%

1950 17%
1950-1980 3.5% 1981-1990 2.1%
1991-2000 1.8% 1990 52%
1980-2002 6.0%
2001-2010E 1.5% 2000 65%
2002-2006 8.0%
2010E 80%

The result of the above could be significant rise in the income levels
continuing India on the the consumption led growth trajectory

Source: CSO
Enablers in place for virtuous cycle

Growth
Enablers
Opportunities
 Cost

Competitiveness
 Skilled
Rising Significant
Manpower Employment
Consumption
 Young

Population
 Greater Access Higher Income
to credit
 India Inc now has global aspirations

Acquirer Acquiree Deal Value

Tata Steel Corus $ 10.4 billion

Hindalco Novelis $ 6.0 billion

Suzlon Energy Repower $ 1.8 billion

Tata Tea Glaceau $ 677 million

In fact, Tata Tea recently sold off Glaceau at a 50% profit to Coca Cola highlighting
the fact that the global ambitions are supported with sound financial decisions and
not ego satisfactions

Source: Media Reports

Foreign Institutional Flows
 India’s market cap : $1 tn
 As % of global market cap : 1.8%
 India’s GDP : 2.0% of global GDP
 India’s GDP on PPP basis : 6.3% of global GDP
 Foreign exposure to India : 0.4% of global equity market cap
Source: Bloomberg, IMF World Economic Outlook April 2007

If the allocation were to increase to 1% of global equity market cap,

that would mean an additional inflow of US $330bn !!
Domestic Flows too will continue
Estimated* #(p.a)
Year 2008 2009 2010 2011 2012
GDP 44,80,000 50,18,000 56,20,000 62,94,000 75,52,800
Savings @ 21% 9,41,000 10,53,000 11,80,000 13,22,000 15,86,000
Equity Inflows @ 5 % 47,000 52,600 59,000 66,100 79,300

 Total Household Savings in next 5 years estimated at Rs. 60,82,000 Crs

 Current allocation to Equities is 2% of the total household savings.
 Equities on tax adjusted basis is still the best savings option
 If allocation were to rise to a modest 5% of savings, domestic inflows in
equities will be a staggering Rs 3,04,000 crs
* Savings rate is estimated to grow in line with the GDP growth rate, which is estimated at 8% CAGR

# These are only estimates & actuals may vary (Source: www.abnamro.com)
Three Year Sensex EPS Scenario
SENSEX EPS SCENARIOS

Growth 15% 20% 25% 17000 20.0x

15000
FY07(E) 740 13000 16.0x

P/E 19.6 11000 13.0x

9000
10.0x
FY08(E) 851 888 925 7000

P/E 17.0 16.3 15.7 5000

3000
FY09(E) 979 1066 1156 1000

Jul-05
Apr-98

Feb-00

Jan-01

Oct-02

Sep-03

Aug-04

Jun-06
Mar-99

Dec-01

May-07
P/E 14.8 13.6 12.5

FY10(E) 1125 1279 1445

P/E 12.9 11.3 10.0

Source: Bloomberg, Mkt At 14500 levels
 To Recap ……..Why India?
India is among the
three most
attractive FDI
By 2032, India destinations in the
will be among > Attractive Destination
world
the three largest > Sustained economic growth
economies in the > Higher earning prospects
world A T Kearney FDI Confidence Index 2005
> Skilled Labour advantage
Goldman Sachs > Future global power house

“India is a
developed India has among
country as far as the highest returns
intellectual on foreign
“We came to India
capital is investment
for the costs,
concerned.” stayed for the
Jack Welch quality and are US Department of Commerce
General Electric now investing for
innovation.”

Dan Scheinman, Cisco System Inc.

Business Week, August 2005
India from a global eye

> “India will become the world’s fifth largest consumer market by 2025.”
Mckinsey & Co.

> “Both countries [India and China] will create new world class companies that would be
competitive with companies based in the west.”
Deloitte Research

> "The economic dominance of the US is already over. What is emerging is a world economy.
India is becoming a powerhouse very fast.”
Peter Drucker, Management Guru, In Fortune

> "India is not just about IT or business process outsourcing. We see it as an incubator for giant
global corporations driven by IT strategy."
Prof Warren McFarlan, Senior Associate Dean, Harvard Business School
General Concerns
 High interest rates could impact the consumption and delay capex plans

 Inflation – led by global inflation and supply side constraints

 Rupee appreciation could hurt exports in the short run

 Slow progress on Infrastructure development may create bottle-necks

 Slow progress on Agricultural reforms

 Inequitable growth and inequalities of income

 Local and global geo political risks

 Valuations have little room for negative surprises

Near Term Concerns

> Global market volatility

> Concerns in global economies like US, China
> Last 3 years has seen earnings of Sensex companies rise by 29% CAGR,
much above analysts expectations and leading to frequent upgrades.
From here on, earnings growth is expected to be more modest.
> A slew of fresh public offerings will suck out money supply that otherwise
would have been deployed in the secondary markets
> Monsoons – delay or below normal can cause concerns
Reliance Systematic Investment Plan
Contents

> What is SIP

> Benefits of SIP

> Our Schemes offering SIP

> Product Features of SIP

> Methods through which SIP can be done

 Do you want an
investment
Are you looking at
technique which can
investing for the long
make you invest
term??
regularly??

Choose
then
SIP

Do you want your

investments to be Do you want your
professionally investments with
managed?? least paper work??
What is Systematic Investment Plan (SIP)?

> SIP is a long term investment technique under which you invest a
fixed sum of money on a monthly or quarterly basis in a mutual fund
scheme at the prevailing NAV.

> This allows you to save and invest regularly while you are earning.
Benefits of SIP

Improves
Helps averaging
probability of
cost of
better returns
investment

Protects
against market Eliminates need
volatility for timing
markets

Invest with
small amounts
Inculcates
savings habit
Benefits of SIP
Small, regular investments

> The Reliance Systematic Investment Plan (SIP) is a simple way to enter the
market by investing small amounts.
> Deposit a fixed sum – as little as you want every month
> Investments grow step by step
> Prudent to invest with a long term horizon in mind

Small but regular investments go a long way in creating

wealth over time
Benefits of SIP
Rupee cost averaging

> Investments spread regularly over a period of time

> Fewer units during rising markets and more units during falling markets
> Reduces the average cost per unit

Results in a lower cost per unit

Averaging cost of investment

Through SIP you make regular investments in different market

conditions which helps you to average your cost of purchase.

Month Amount NAV Units

1 1,000 10.00 100.00

2 1,000 9.40 106.38
3 1,000 10.60 94.34
Total 3,000 9.98 300.72

Average
Cost of
Purchase
Benefits of SIP
No ‘timing the markets’

> Disciplined, regular investments

> No need to pick the right time to buy and sell as timing the market is time
consuming and risky
> No need to worry about when and how much to invest

Eliminates the need to actively track the markets

Benefits of SIP
Power of Compounding
A holds for
30 years Start Early
500000 B holds for
409130
400000 20 years
300000
209357
200000

100000

0
A B

> A & B invest Rs. 500 every month, earning interest @ 8% p.a. on a monthly compounding
basis
> A starts at the age of 25 yrs, while B starts investing at the age of 35 yrs
> Both of them invest for 5 yrs ( Rs. 30,000) and hold their investments till 60 yrs. of age
> A’s investment appreciated to over Rs.4 lacs while B’s investment grew to only Rs. 2 lacs
Benefits of SIP
Achieve your financial goals

> An effective tool for financial planning

> Helps inculcate regular savings habit – be it for your children’s education,
marriage or buying a home
> Helps you choose a pertinent regime and achieve your goals, systematically
Best results over long term

Longer investment horizon provides insulation against portfolio

value depreciation

Longer investment horizon enhances the probability of better

returns
 SIP Returns for Reliance Vision ( Investment Amount Rs 1000/-)

SIP Return as on July 31, 2007

Period 1 Year 3 Year 5 Year Since inception

SIP Start Date 8/1/2006 8/1/2004 8/1/2002 10/8/1995

Current NAV (As on 31/07/2007) 219.24 219.24 219.24 219.24

Total No. of units accumulated 67.93 308.12 953.81 6944.72

Total Amount Invested 12000 36000 60000 142000

Present Value 14892.27 67551.70 209114.22 1522561.36

Yield 50.12% 46.26% 52.87% 36.72%

Present Value if invested in Index 14489.26 62441.76 159364.92 546779.91

Yield From Index 42.77% 39.93% 40.67% 21.21%

 Reliance Equity Opportunities

SIP Return as on July 31, 2007

Period 1 Year Since inception

SIP Start Date 8/1/2006 31/03/2005

Current NAV (As on July 31,07) 23.82 23.82

Total No. of units accumulated 582.75 1851.66

Total Amount Invested 12000 29000

Present Value 13879.7 44102.21

Yield 31.87% 38.14%

Present Value if invested in Index 14489.26 44823.54

Yield From Index 42.77% 39.78%

 Reliance Growth
SIP Return as on July 31, 2007

Period 1 Year 3 Year 5 Year Since inception

SIP Start Date 8/1/200 8/1/2004 8/1/2002 10/8/1995

Current NAV (As on 31/03/2007) 324.13 324.13 324.13 324.13

Total No. of units accumulated 46.17 324.13 785.06 5974.80

Total Amount Invested 12000 36000 60000 142000

Present Value 14965.76 70196.33 254460.97 1936612.35

Yield 51.47% 49.41% 61.98% 40.41%

Present Value if invested in Index 14489.26 62441.76 159364.92 546779.91

Yield From Index 42.77% 39.93% 40.67% 21.21%

Reliance Diversified Power

Period % change in % change in

NAV Index
1 year 93.81% 56.42%

Since 62.39% 36.14%

Inception
Performance –RGF V/s BSE 100
NOV 2004, SENSEX at
6165; RGF NAV at a
historic Rs 100

JAN 2004, SENSEX

crosses 6000 again;
RGF NAV = Rs 80
FEB 2000, SENSEX
touches 6000 for the
1st time; RGF NAV =
Rs 45
Feb-00

Jun-00

Oct-00

Feb-01

Jun-01

Oct-01

Feb-02

Jun-02

Oct-02

Feb-03

Jun-03

Oct-03

Feb-04

Jun-04

Oct-04

Feb-05

Jun-05

Oct-05

Feb-06

Jun-06
S e nse x RGF BSE 100
Returns for less than 1 year are absolute and for above 1 year are calculated on compounded annualised basis. Returns assumed that all
payouts during the period have been reinvested in the units of the scheme at the then prevailing NAV.

"Past performance may or may not be sustained in future”

Get Started..
Watch your investments bloom
Risk Factors

Sponsor : Reliance Capital Limited • Trustee : Reliance Capital Trustee Co. Limited
Investment Manager : Reliance Capital Asset Management Limited
Statutory Details : The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act
1956.
Risk Factors : All Mutual Fund and securities investments are subject to market risks and there is no assurance and no
guarantee that the Schemes objectives will be achieved. As with investments in any securities, the NAVs of the units
issued under the Schemes can go up or down depending on the factors and forces affecting the securities market.
Reliance Index Fund, Reliance Tax Saver (ELSS) Fund, Reliance Equity Opportunities, Reliance Media &
Entertainment Fund, Reliance Vision Fund, Reliance Growth Fund, Reliance Income Fund, Reliance Medium Term
Fund, Reliance Short Term Fund, Reliance Regular Savings Fund, Reliance Banking Fund, Reliance Monthly Income
Plan, Reliance Floating Rate Fund, Reliance Diversified Power Sector Fund , Reliance Pharma Fund, Reliance NRI
Income Fund, Reliance NRI Equity Fund and Reliance Liquid Fund are only the names of the Schemes and do not in
any manner indicate either the quality of the Schemes, their future prospects or returns. Past performance of the
Sponsor or its group affiliation is not indicative of future performance of the Schemes. The Sponsor is not responsible or
liable for any loss resulting from the operation of the Schemes beyond their initial contribution of Rs.1 lac towards the
setting up of the Mutual Fund. The Mutual Fund is not guaranteeing or assuring any dividends/ bonus. The Mutual Fund
is also not assuring that it will make periodical dividend/ bonus distributions, though it has every intention of doing so. All
dividend/ bonus distributions are subject to the availability of distributable surplus in the respective Schemes. The
liquidity of the Schemes investments may be inherently restricted by trading volumes, settlement periods and transfer
procedures. Scheme specific risk factors have been mentioned in the Offer Document.
Please read the offer document carefully before investing.