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.

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.

(MV of Investments+ Current Assets+AccruedNAV= Income – Current Liabilities – Accrued Expenses) Total Number of units outstanding

> 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… One of the fastest growing economies State of art infrastructure Global scale of operations International centre of excellence for most skills

Under Developed

Economy Slow rate of growth Bureaucracy Lack of infrastructure

PAST

Developing Economy

Huge Infrastructure

Investment

Rising Aspirations…

Matched with improved

confidence

PRESENT

FUTURE

What would drive the future…

1900-1950 1.0%

1950-1980 3.5%

1980-2002 6.0%

2002-2006 8.0%

Avg GDP growth heading northwards

1951-1980 2.2%

1981-1990 2.1%

1991-2000 1.8%

2001-2010E 1.5%

Slowing populationgrowth

Rising literacy rate

1950 17%

1990 52%

2000 65%

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

Enablers Cost

Competitiveness Skilled

Manpower Young

Population Greater Access

to credit

Growth Opportunities

Rising Consumption

Higher Income

Significant Employment

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

If the allocation were to increase to 1% of global equity market cap, that would mean an additional inflow of US $330bn !!

Source: Bloomberg, IMF World Economic Outlook April 2007

Domestic Flows too will continue

(Source: www.abnamro.com)

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

# These are only estimates & actuals may vary

* Savings rate is estimated to grow in line with the GDP growth rate, which is estimated at 8% CAGR

Three Year Sensex EPS Scenario

Source: Bloomberg, Mkt At 14500 levels

25%20%15%Growth

12.5

1156

15.7

925

13.6

1066

16.3

888

14.8P/E

979FY09(E)

17.0P/E

851FY08(E)

19.6P/E

740FY07(E)

SENSEX EPS SCENARIOS

FY10(E)

P/E

1125

12.9

1279 1445

11.3 10.0

1000

3000

5000

7000

9000

11000

13000

15000

17000

Apr-9

8

Mar-99

Feb-00

Jan-01

Dec-01

Oct-02

Sep-03

Aug-04

Jul-0

5

Jun-06

May

-07

10.0x

13.0x

16.0x

20.0x

To Recap ……..Why India?

> Attractive Destination

> Sustained economic growth

> Higher earning prospects

> Skilled Labour advantage

> Future global power house

US Department of Commerce

A T Kearney FDI Confidence Index 2005

By 2032, India will be among

the three largest economies in the

world

Goldman Sachs

“India is a developed

country as far as intellectual capital is

concerned.”

Jack WelchGeneral Electric

“We came to India for the costs, stayed for the quality and are

now investing for innovation.”

Dan Scheinman, Cisco System Inc. Business Week, August 2005

India has among the highest returns

on foreign investment

India is among the three most

attractive FDI destinations in the

world

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

Are you looking at investing for the long

term??

Do you want your investments to be

professionally managed??

Do you want an investment

technique which can make you invest

regularly??

Do you want your investments with

least paper work??

thenChoose Choose SIPSIP

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

Inculcates savings habit

Invest with small amounts

Eliminates need for timing markets

Helps averaging cost of

investment

Protects against market

volatility

Improves probability of better returns

Benefits of SIPSmall, 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 SIPRupee 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 SIPNo ‘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 SIPPower of Compounding

Start Early

409130

209357

0

100000

200000

300000

400000

500000

A B

B holds for 20 years

A holds for 30 years

> 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 SIPAchieve 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 NAV

% change in Index

1 year 93.81% 56.42%

Since Inception

62.39% 36.14%

Performance –RGF V/s BSE 100

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

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.

FEB 2000, SENSEX touches 6000 for the 1st time; RGF NAV =

Rs 45

JAN 2004, SENSEX crosses 6000 again;

RGF NAV = Rs 80

NOV 2004, SENSEX at 6165; RGF NAV at a

historic Rs 100

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S e n s e x R G F B S E 1 0 0

Get Started..

Watch your investments bloom

Risk Factors

Sponsor : Reliance Capital Limited • Trustee : Reliance Capital Trustee Co. Limited Investment Manager : Reliance Capital Asset Management LimitedStatutory 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.