Indian Equity Market Investing

Odds

BSE Sensex

Notes
1. Based on last 33 years Sensex data and 12.5 years of Sensex P/E
Data (Source: Bloomberg)
2. Inflation is assumed as 7% p.a.
3. One month return are tax adjusted @ 20%
4. Return for one year and more are assumed to be tax free

Sensex Return
100%

1%
14%

90%
43%

8%
15%
11%

31%

80%

9%

17%
18%

70%
8%

zero or negative return

60%
4%

50%
81%

40%

84%

return higher than inflation rate

74%
68%

30%

61%
54%

20%
10%
0%
1 Month

1 Year

3 Year

5 Year

Investment Horizon

positive but lower than inflation

return

7 Year

10 Year

1 Year Rolling Return

30

185.00%

25

1 yr rolling
return
135.00%

20

Inflation

Jun-10

Jun-08

Jun-06

Jun-04

Jun-02

Jun-00

Jun-98

Jun-96

-65.00%
Jun-94

Average PE

Jun-92

Jun-90

-15.00%

Jun-88

PE Ratio (offset
by 1 yr)

Jun-86

10

Jun-84

35.00%

Jun-82

15

Jun-80

85.00%

3 Year Rolling CAGR

30

80.00%

25

3 yr rolling cagr

60.00%
20

Inflation

40.00%
15

20.00%

0.00%

-20.00%

10

PE Ratio (offset
by 3 yr)

Average PE

Jun-10

Jun-08

Jun-06

Jun-04

Jun-02

Jun-00

Jun-98

Jun-96

Jun-94

Jun-92

Jun-90

Jun-88

Jun-86

Jun-84

Jun-82

5 Year Rolling CAGR

25

53.0%

43.0%

20

5 yr rolling cagr

15

Inflation

10

PE Ratio (offset
by 5 yr)

33.0%

23.0%

13.0%
5

3.0%

-7.0%
Jun-10

Jun-08

Jun-06

Jun-04

Jun-02

Jun-00

Jun-98

Jun-96

Jun-94

Jun-92

Jun-90

Jun-88

Jun-86

Jun-84

Average PE

7 Year Rolling CAGR

25

43.0%

33.0%

23.0%

13.0%

20

7 yr rolling cagr

15

Inflation

10

PE Ratio (offset
by 7 yr)

Jun-10

Jun-08

Jun-06

Jun-04

Jun-02

Jun-00

Jun-98

Jun-96

Jun-94

Jun-92

Jun-90

-7.0%
Jun-88

Jun-86

3.0%

Average PE

10 Year Rolling CAGR

25

37.0%
32.0%

20

10 yr rolling cagr

15

Inflation

10

PE Ratio (offset
by 10 yr)

27.0%
22.0%
17.0%
12.0%
7.0%

2.0%
-3.0%
Jun-11

Jun-09

Jun-07

Jun-05

Jun-03

Jun-01

Jun-99

Jun-97

Jun-95

Jun-93

Jun-91

Jun-89

Average PE

Improving odds
Investing irrespective of PE level

Investing only when PE is less

than 16.9 (last 12.5 year average)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

12%
42%

35%

0%
15%

0%

16%

5%
4%
100%
85%
72%
55%

59%

1 Month

1 Year

3 Year

5 Year

7 Year

7%
4%

0%
4%

0%

96%

100%

5 Year

7 Year

28%
42%
6%
4%
89%
66%
54%

1 Month

1 Year

3 Year

zero or negative return

zero or negative return

positive but lower than inflation return

positive but lower than inflation return

return higher than inflation rate

return higher than inflation rate