Slide 1
Is it the Right Time to Invest in Equities Nooresh Merani
www.nooreshtech.co.in
www.nooreshtech.co.in Equities and Questions CAGR returns of
Indian Markets ?Inflation is at 10% so how much should you expect
from equities or any other asset?Should you buy direct equities or
Mutual Funds/ETFs or ULIPS. Time in the Market is important or
timing the market is important. What is the long term outlook of
Indian Equity Markets ? Should Real Estate and FD be 99.5% of your
networth.
www.nooreshtech.co.in Indian Equities 17% CAGR for 35 yrs
This is now at 15-15.5 % over 36-37 years
www.nooreshtech.co.in Be Passive and Dont Learn
www.nooreshtech.co.in Real Estate doubles in 3 years
www.nooreshtech.co.in
Buy Real Estate, Buy Loans, Spend Money and if you have money
left make some FDs and buy some Gold.
For some fun trade equities !! For more thrill trade
derivatives.
www.nooreshtech.co.in Real Returns
Will your Salary Increase equivalent to the Inflation forever
?Will Inflation go down in India ?Will you get a Lottery ?
If you think any of that is not going to happen you would need
Equity Investment. How much as part of portfolio ? ( For that
Jagoinvestor)
www.nooreshtech.co.in Equity Markets are Scary In Bear Markets
Nifty/Sensex drop by 55-60% and story stocks by 90% ( example DLF /
Unitech / Suzlon from 2007 ) In Bull Markets Nifty/Sensex go up by
3-8 times and stocks 10-50-100x. But it is the downside which
scares everyone as people enter when there is euphoria. Nobody
likes Temporary Loss for Long Term Gain.
www.nooreshtech.co.in 1992 Bear Market
www.nooreshtech.co.in 2000 IT boom Bear Market
www.nooreshtech.co.in 2008 Financial Crisis Bear Market
www.nooreshtech.co.in 35 year Log Chart
www.nooreshtech.co.in Corrections in 2005-2007 Bull Market
If only Sensex would go up one way it would be so easy. Stocks
do more 12% Dip 13.2% Dip 30% Dip 16 % Dip 13 % Dip
www.nooreshtech.co.in
The ride wont be easy but neither is a job or a business which
gives you money at the end of the year.
If you get ill you search the right doctor and go to him. If you
want to stay healthy you walk or you go to the gym
But in equities if you are coming for a thrill, you dont need
any one. But if you are serious find a good advisor , trainer or
learn it yourself .
www.nooreshtech.co.in Indian Equities 17% CAGR for 35 yrs
www.nooreshtech.co.in Even NSE says 16% CAGR in 10 yrs
www.nooreshtech.co.in Sensex/Nifty CAGR Returns 16th Feb
1996Sensex 350016th Feb 2016Sensex 2338116th Feb 1996Nifty 102316th
Feb 2016Nifty 7108Equities give a return of 15% right over long
term ( 20 yrs is long enough ) ? Your Mutual Fund , Financial
Planner , Market Gurus , Books say so right ?
www.nooreshtech.co.in Now Get Surprised ? How long is Long Term
Sensex 20 yr Cagr = 10% Nifty 20 yr Cagr = 10%
10 yr CAGR = 9%
www.nooreshtech.co.in Then how does 16-17% come on SensexIn the
period of 1979-1992 Sensex went up by 40 times. In 4 years from
1988 to 1992 it went up 11 times. Were exchanges accessible to all
investors across India in the early 1980s ? How many mutual funds
were present ? ( 0 private mutual fund ) How many companies closed
shop ( delisted) for every Infosys/Wipro/Dr Reddys and so on.
www.nooreshtech.co.in But NSE ne bola 16% View from Money Life (
www.moneylife.in ) NSE has taken a convenient 10-year period when
Nifty has indeed delivered an annualized return of 16%. What about
the other 10-year periods? We have analyzed the 10-year returns of
the Nifty from March 1991 to September 2013, with a six month
frequency.Out of the 26 periods, the Nifty delivered a return of
16% or greater in just seven periods, i.e. just 27% of the
time.Much of the returns came in the massive bull-run witnessed
between 2003 to 2007. Had one invested in Sensex in 1992, investors
would have even faced negative returns after 10 years. Nifty was
not around in 1992 but the returns would have been similar. The
10-year period from March 1992 to March 2002 would have resulted in
a loss of 1%. The investor would have had to sell his scooter and
settle for bus rides. For the 10-year periods ending September 2001
to March 2005, investors would have had to settle for a return of
less than 10%. The average of the 26 ten-year periods works out to
12%. NSE has chosen to present a misleading picture of returns but
arbitrarily choosing a start date and an end date, all in the
investors interest.
www.nooreshtech.co.in Sensex Its never been Better for equities
in Last 10 -20-30 years. Although we see a lot of buzz about new
highs on Sensex. This is after 6 years. Returns of 6 years 0%. A 10
yr return is 14.8% ( this had a period of 2004-2007 bull market). A
20 year return is a just 9% ( this does not beat the fixed deposit
return).
We hear a lot of jazz about 15-19% CAGR on Sensex by every
financial expert who suggests buy and hold for long term. This data
is not reliable because of the big run in 1980s. ( It went up 40
times in 1979-1992). We wont get a period ever in decades to come?
Also how many mutual funds were present in 1980s ? How many
companies closed shop for every Infosys/Wipro/Dr Reddys.
So essentially CAGR growth in equities has been terrible over
last 20 years. Its been pathetic over the last 8-10 years. The
conclusion in this case is the adage Time in the market is more
important than timing the market is being tested for investors.
Also the 15-17% CAGR of Sensex is unreliable.
Statistically we believe the best times for investors are when
5-10-20 year CAGR returns do not beat fixed returns and vice
versa.
www.nooreshtech.co.in You should buy at bottoms !! Bottom after
Harshad Mehta Scam 28th April 1993Sensex 210016th Feb 2016Sensex
2338128th October 2008 Sensex 8500 16th Feb 2016Sensex 23381CAGR =
11.05%
CAGR = 12.7%
If you buy at 10k your CAGR shifts to 12.7 %
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Sensex at 5725 in Feb 2000Sensex in 2020@ 10% CAGR for 20 years
38515@12% CAGR for 20 years 55225@15% CAGR for 20 years93698@ 16 %
CAGR for 20 years Not writing it
Sensex at 16in Feb 2010 Sensex in 2020@ 10% CAGR for 10 years
42086@12% CAGR for 10 years 50395@15% CAGR for 10 years65643@ 16 %
CAGR for 10 years 71579
If you take from 21000 in 2008 to 2020. Even at 7% CAGR it has
to be 47000. For how many years does it hurt to buy at wrong
times
www.nooreshtech.co.in Why its not 2008 again ? 1992 Harshad
Mehta Markets down 55-60% 2000 Ketan Parekh Markets down 55-60%
2008 - Financial Crisis Markets down 55-60% . Ramalingam Raju in
jail.
2016 No broad based run up or sectoral craziness in 2012-2015.
It could be a 8 yr cycle of fraud ? So which corporate or
individual goes to jail ?
www.nooreshtech.co.in Nifty A different animal from 2007
www.nooreshtech.co.in Wow Facts Out of the Top 20 stocks in 2007
only 10 remain in 2015 in the Top 20 weights.Out of top 20 in 2007
there are 4 stocks which are not part of Nifty. ( RPL got merged in
RIL ). This constituted 11.67% of Nifty.Out of the Top 10 weights
in Nifty only 3 remain in Top 10 of 2015. These 3 constitutred
20.03% of Nifty and are now only constituting 14.95% of Nifty.The
top 4 weights of 2015 Infosys/ hdfc bank / hdfc / itc now command a
weight of 28.85% but used to command only a weight of 9.95% in 2007
!! -------------- ( WOW )Reliance Industries and Reliance Petroleum
i.e RIL an RPL had a combined weight of 14.56% and now its only
Reliance with a weight of 5.91% ------------------ ( WOW)Rcom was
the 7th largest weightage in Nifty is no more part of it. Even
Unitech was at the 16th place.ONGC the 2nd largest weightage on
Nifty is now at the 21st place. From 7.13% to 1.56%.
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Analysts are as scared with price as you are !!Earnings
Downgraded in 2009 !!
www.nooreshtech.co.in Nifty 2011 and 2016
www.nooreshtech.co.in Nifty 2016
www.nooreshtech.co.in Nifty 2012 GREEN SHOOTS
www.nooreshtech.co.in Nifty 2011 and Dow Jones
www.nooreshtech.co.in Nifty and Dow 2016
www.nooreshtech.co.in Nifty Channel
www.nooreshtech.co.in Long Term Chart
www.nooreshtech.co.in Global Data Points
www.nooreshtech.co.in Bond and Treasury Yields
www.nooreshtech.co.in Nifty Quick Take on P-E Fy16 estimated EPS
400-420 FY 17 estimated EPS 460-500. ( Now nobody gets this
right).Good P-E to buy 14-17 times Trailing.5750-7000 is the range.
With Ebidta margins/ROE at 20 year lows things can get better from
here and not worse in next 3-5 years. With a 25% drop from top and
coming into decent multiples. Risk-Reward favorable. Back to modi
prices with crude at 30$
www.nooreshtech.co.in Why do you need to Invest in Equities Real
Estate Returns on EMI
www.nooreshtech.co.in P-E of Real Estate When we look into
equities Nifty at 22-28 P-E is very expensive . Average at 14-18
P-E. Cheap at 10-14 P-E. Rough Estimates.
Real Estate 2 Bhk at 2 crores in Mumbai Monthly Rent = 50 k.
Annual Rent = 6 lakhs
Hassles for 2nd Home = Maintenance, Tenants, Brokerage and so
on.
Earnings = 6 lakhs. Price = 2 cr. P- E Multiple = Price /
Earnings= 20000000/600000= 33.3
Is Real Estate Undervalued ? Do you need diversification ?
www.nooreshtech.co.in Compounding and Real Estate Myths Real
Estate Doubles in 3 years = 26 % CAGR Real Estate Doubles in 5
years = 15% CAGR The magic of real estate returns is not in the
Real Estate but in the leveraging of loans. If you believe double
in 3 years. A 2 cr flat would be worth 20 cr in next 10 years and
200 cr in 20 years. If you believe double in 5 years. It would be
worth 8 cr in next 10 years. 32 crores in 20 years.
www.nooreshtech.co.in The Real Questions to Ask Will your Real
Estate grow at 15% CAGR and 25% CAGR or at 5% or 10% or go down by
20% over next few years?Your Home Loan will remain at 10% ? Will
your income grow at 15% and 25% for next 10/20/30 years. Will FD
returns remain at 9-10% or go down to 4-7% in next 5-10 years.
Equities have large drawdown's ( remember 60% fall in 2008) but
they do have large upsides ( remember 2004-2007). Do all your
assets have similar risk-rewards ? Do you need to think about your
equity exposure. If you want to prosper in equities think not of
what you can do in next 1 month but in next 10 years. Learn today
to prosper tomorrow. Learn fundamentals , technicals both and above
all common sense and statistics.
www.nooreshtech.co.in Strategy In Equities now it does not
matter how much returns you make but what will matter what is the %
of equities in your networth. People get worried about 5 lakhs of
equity going down by 20% but have 20 lakhs in current and savings
account. We believe over the next 3-6-12 months Investors should
increase conviction and allocate more funds to long term/medium
term investments in direct equities/mutual funds. This can happen
only if you work hard , learn and stay convinced to ride the good
trend and be alert for opportunities and risks.
www.nooreshtech.co.in Selection is not as Important as
Allocation Random Portfolio Presentation in last year. Real Estate
/ Gold / Bonds So today is the time to allocate as much as possible
to equity. Beg Borrow Steal and Invest ---------- Thats my personal
view !! I can be totally wrong do ur research
www.nooreshtech.co.in Team Analyse India Nooresh MeraniCEO -
Analyse IndiaCell:+91-9819225396e-mail:
[email protected]
Ankit Chaudhary Technical Analyst and Derivative Strategist -
Analyse India Cell:+91-9899899989e-mail: [email protected]
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