Why Equity? How to look through noise and build wealth? Date: March 2016

Transcription

1 Why Equity? How to look through noise and build wealth? Date: March 2016

2 3 reasons why you should INVEST In EQUITY! India s growth drivers highlight the potential of equity markets Prospect of not having to work your entire life save for early retirement Opportunity to outperform the ever increasing inflation higher purchasing capacity Ability to fulfil your goals in life future focus Historically, equity investment has relatively outperformed other asset classes over long term Equity investment is relatively less explored in India compared to other investments option 2

3 Globally, equity is the most preferred investment avenue Emerging economies, significantly under-exposed to equities compared to developed economies India has the lowest exposure to equities with an allocation of only 4% Source: Morgan Stanley, December

4 Is my traditional saving method giving me enough cushion? Fixed Deposit returns < increase in cost of living Bank Fixed Deposits (average returns), 7.22% Difference between saving & investing is the ability to provide affordability cushion by beating inflation on a regular basis Source: Graph 1 - SBI, World bank. Period:

5 Equity provides cushion against ever-increasing cost of living Smartest way of wealth creation Regular investing in Equity helps you tackle cost of living and also plan for future goals Source: BSE India, World Bank. Period:

6 If our expenses are real, our returns should also be real Post-inflation returns Real cost of today s expense over time Value of today s INR 100,000 over time Savings is not enough; You also have to beat inflation! 6

7 What worked yesterday, may not work tomorrow Which asset class gives higher returns? Equities have outperformed other asset classes ^Average of CAGR returns * XIRR returns 7

8 Equity growth has been 220X in the last 35 years This turns out to a CAGR of 16.15% Trend remains unchanged Source: BSE India,

9 But the ride was not smooth for anybody Crisis periods are recurrent, so are growth cycles Source: RIMES, MSCI, Morgan Stanley Research as of January,

10 Making more by losing less A consistent, predictable behavior over time Lowest CAGR = 7.06% Highest CAGR = 16.10% Average CAGR = 12.46% 100% above inflation & positive 15 year returns 70% above inflation & 100% positive 10 year returns Lowest CAGR = 2.89% Highest CAGR = 19.06% Average CAGR = 12.34% 10

11 Short-term volatility has always been a part of Equity investing BSE Sensex 3-year rolling return 5-year rolling return 7-year rolling return 10-year rolling return 15-year rolling return Average rolling period return 13.36% 11.67% 11.89% 12.34% 12.46% Total time periods Total number of positive returns* Total number of negative returns^ Positive investment periods 82% 85% 94% 100% 100% Longer you stay invested, lower the possibility of negative return In long term, probability of incurring loss is lower in equities *Positive returns Number of investment periods during which returns have been positive. For example, where investment returns have been computed for 15 years, 10 years offered positive returns (profits), the number of positive returns are 10. ^Negative returns Number of investment periods during which returns have been negative. For example, where investment returns have been computed for 15 years, 5 years offered negative returns (losses), the number of negative returns are 5. Source: MFI & Bloomberg 11

12 If you invest for a far-off goal, you can ride out the downturn Recovery time: 2 years 4 months Maximum loss: -54.4% Profit if held till 31/12/15: 7.73% Recovery time: 3 years 11 months Maximum loss: -56.2% Profit if held till 31/12/15: 9.77% Recovery time: 2 years 10 months Maximum loss: -60.9% Profit if held till 31/12/15: 2.65% Losses in Equity are transitory with Time in the market 12

13 The 2025 mirage scenario Are you prepared? ^ Projected bull M cap: INR 652 lakh crore Projected GDP growth Projected base M cap: INR 357 lakh crore Projected bear M cap: INR 234 lakh crore Wealth creation from 2015 to 2020 could be 3X wealth created in last 5 years (base case) Source: Bloomberg data with projection data until The forecast, projection or target contained in this graph is for illustration purposes only and is not guaranteed in any way. Such forecasts, projections or targets are based on internal analysis and hence will be different from the actuals. 13

14 To summarise Equity is a core long term capital growth solution The future is uncertain; prediction is risky Preserve and, if possible, grow, capital, in real terms, over the long term Avoid permanent impairment of capital through risk averse capital allocation Target outperformance only over a full cycle 14

15 Someone is sitting in the shade today because someone planted a tree a long time ago Warren Buffett 15

16 Are you ready to take part in the Equity Vision?

17 Thank You

18 Disclaimer This document has been prepared by HSBC Asset Management (India) Private Limited (AMIN) for information purposes only and should not be construed as an offer or solicitation of an offer for purchase of any of the funds of HSBC Mutual Fund. All information contained in this document (including that sourced from third parties), is obtained from sources, which AMIN/ third party, believes to be reliable but which it has not been independently verified by AMIN/ the third party. Further, AMIN/ the third party makes no guarantee, representation or warranty and accepts no responsibility or liability as to the accuracy or completeness of such information. The information and opinions contained within the document are based upon publicly available information and rates of taxation applicable at the time of publication, which are subject to change from time to time. Expressions of opinion are those of AMIN only and are subject to change without any prior intimation or notice. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies that may have been discussed or recommended in this report and should understand that the views regarding future prospects may or may not be realized. Neither this document nor the units of HSBC Mutual Fund have been registered in any jurisdiction. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions. Copyright. HSBC Asset Management (India) Private Limited 2016, ALL RIGHTS RESERVED. HSBC Asset Management (India) Private Limited, 16, V.N. Road, Fort, Mumbai Mutual fund investments are subject to market risks, read all scheme related documents carefully. 18