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Why earn?. Month 00 2006. Why Invest?. The Objective. Wealth Creation. - PowerPoint PPT Presentation
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A Reliance Capital Company
Month 00 2006
Why earn?
Why Invest?
A Reliance Capital Company
The Objective
Wealth Creation
A Reliance Capital Company
Comparative returns for the last 20 yearsWhat $1000 invested at the end of 1986would be worth at the end of 2006? Instrument Value Average Annual Return Stocks (S&P500) $9310 11.80% Real Estate $8540 11.32% Commodities $6510 9.82% International Stocks $5020 8.40% Inflation (CPI) $1820 3.05% Gold $1550 2.23%
A Reliance Capital Company
Month 00 2006
Power of Equity
Unbelievable
but it has happened
A Reliance Capital Company
Just imagine…
• How much can you make in 26 years by just investing Rs.10,000 initially in any of financial instruments ?
• Take a wild guess ???
• Let us look at the real example…
A Reliance Capital Company
If you have subscribed in 100 shares of ________ company with a face value of Rs. 100 in 1980…
• In 1981 company declared 1:1 bonus = you have 200 shares• In 1985 company declared 1:1 bonus = you have 400 shares• In 1986 company split the share to Rs. 10 = you have 4,000 shares• In 1987 company declared 1:1 bonus = you have 8,000 shares• In 1989 company declared 1:1 bonus = you have 16,000 shares• In 1992 company declared 1:1 bonus = you have 32,000 shares• In 1995 company declared 1:1 bonus = you have 64,000 shares• In 1997 company declared 1:2 bonus = you have 1,92,000 shares• In 1999 company split the share to Rs. 2 = you have 9,60,000 shares• In 2004 company declared 1:2 bonus = you have 28,80,000 shares• In 2005 company declared 1:1 bonus = you have 57,60,000 shares
A Reliance Capital Company
At the end of 2005…
• You have 57,60,000 shares of the company
• Any guess about the company ? • (Hint : Its an Indian company)
• Any guess about the present valuation ?
A Reliance Capital Company
The result of ‘Power of Compounding’
Your present valuation is about
Rs. 200 Cr.+
&
The company is ‘WIPRO’
A Reliance Capital Company
Other such examples…
CIPLAInvestment of Rs. 10,000 in 1979 will fetch Rs. 95 cr.+
INFOSYSInvestment of Rs. 10,000 in 1992 will fetch Rs. 1.5 cr.+
RANBAXYInvestment of Rs. 1000 in 1980 will fetch Rs. 1.9 cr.+
A Reliance Capital Company
Month 00 2006
Basics of Equity Markets
A Reliance Capital Company
Stock Market ============== Mandi
Buyer Buyer Buyer
Seller
Seller Seller Seller
Buyer
Seller’s Price – Higher offer
Buyer’s Price – Lower Offer
Buyers and Sellers come together
A Reliance Capital Company
Stock Exchange (BSE / NSE)
Broker Broker
Sub- Broker Sub- Broker
Client Client
A Reliance Capital Company
Depository (NSDL / CDSL)
Depository Participant Depository Participant
Client Client
Delivery Based (Primary and Secondary Markets)
A Reliance Capital Company
Sub broker Depository Participant Bank
Client
Off-line Model
A Reliance Capital Company
Broker(Reliance Securities)
Sub broker Depository Participant Bank
(R Money Franchisee) (Reliance Capital) UTI, IDBI, HDFC, Offline CMS
Reliance Money
Client
On-line ModelReliance Money
A Reliance Capital Company
Margin Trade
Scenario 1
Company A
Market Opens 10 am
Share Price: Rs. 100/-
Buy 100 shares
Total Investment Rs. 10000/-
At 2 pm
Share Price : Rs. 120/-
Sell 100 shares
Profit: Rs. 2000/-
Return on investment: 20%
A Reliance Capital Company
Margin Trade
Scenario 2
Company A
Market Opens 10 am
Share Price: Rs. 100/-
Buy 100 shares
Total Investment Rs. 2000/- Broker provides Rs. 8000/-
At 2 pm
Share Price : Rs. 120/-
Sell 100 shares
Profit: Rs. 2000/-
Return on investment: 100%
A Reliance Capital Company
Services Available
• Equities – Delivery, ATST, Margin
• Futures and Options
• IPO's online
•Research Inputs – Dow Jones, Saans
•Trading Ideas – Sachin Chavan, Deepak Mohini
•Overseas Equities, Commodities, Currency combinations.
A Reliance Capital Company
Target Clients
Existing Market
• Traders
• Investors
• IPO Applicants
New Market
•MF Investors
•ULIP Investors
•Debt Market – FD Invetors
A Reliance Capital Company
Futures
Contract
Current Share Price Rs. 100Market assessment of value on last Thursday: Rs. 120/-
Contract Value Rs. 120/-
My Assessment: Rs. 125/-
I ‘ll buy the contract.
Counter Party Assessment: Rs. 115/-
Counter party sells contract
On last Thursday Price is Rs. 121: Buyer Gains.
On last Thursday Price is Rs. 118: Seller Gains.
A Reliance Capital Company
Thank You