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“SIP is King”

Background The year 2008 was full of events/shocks ranging from the sudden market fall to the bad news about large institutions in global markets going bankrupt, recession in US and terror attacks shaking up the life of people in India. Through all these events, the markets have been very volatile peaking from 21,000 levels to a steep fall to reach 15,000 levels during the financial year end. There on, the markets have been continuously falling on account of a series of bad news to reach 8000 levels in Oct 08. In our opinion the market has seen its worst in Oct 2008 and barring unforeseen events is unlikely to go below those levels. Infact, the market has been range bound since then hovering around 850010000 levels.
(Please refer to Graph 2 for the details)

As we get into next quarter, production is expected to stabilize in various industry segments. Impact of lower excise duties and lower interest rates would help the consumer to come back. Broadly, the Macro situation of India would improve significantly in FY 2010 and post elections one can expect the economy to bounce back meaningfully. Thus, the confidence still remains in the strong trajectory of India growth story. If one were to analyze the market movement of the current year, we can go back to the history to relate it to a similar period seen during the volatile market phase of 2000-2003. Graph 1
6000 5500 5000 4500 4000 3500 3000 2500

Jan-00

Oct-00

Jul-01

Apr-02

Jan-03

Oct-03

20900 18400 15900 13400 10900 8400 Mar-08 Apr-08 May-08 Nov-08 Jul-08 Sep-08 Jan-08 Aug-08 Feb-08 Dec-08 Jun-08 Oct-08

We can see a similarity in the market movement in the 2 graphs

Graph 2
Source: BSE website

As per the first graph, we can see that the markets were very volatile during 2000-2003 where
(please refer to Graph 1 for details)

It went up to 6000 levels during Feb 2000; from there it declined to 3600 levels in Oct 2000 to touch the lowest level of 2600 in Sept 2001 From the lowest point, the markets were seen range bound between 3000-4000 levels for almost one and half yrs. The bounce back started from May 03 onwards to touch the earlier 6000 levels with the next 7 months. Going a step forward let us also evaluate if one were to derive the historical returns of SIP done in equity mutual funds during such a volatile period. Let us consider the example of SIP in Reliance Growth Fund. time period, the returns generated would be If a person had done SIP in Reliance Growth Fund (Retail Plan – Growth Plan – Growth Option) of Rs 1000 p.m during this

RGF

- 56.99%

Volatile Market Scenario

BSE 100 - 26.55%

An astounding SIP returns of 56.99% delivered by RGF over a period of 4 yrs! SIP returns are as on 31.12.03 for a period of 4 yrs Past performance may or may not be sustained in future.
Returns for Retail Plan- Growth Option (Inception Date: 8 October, 1995). Returns for less than one year are absolute returns. Returns of and more than one year are compounded annualized returns. Calculations assume that all payouts during the period have been reinvested in the units of the scheme at the then prevailing NAV. Assumptions: a) Every SIP has an entry load: till October 2004 -2% and from November 2004 – 2.25% has been considered. b) SIP of Rs. 1000/- each has been taken into consideration including the first installment. SIP happen on 10th of every month. Also ST note that we have assumed a/c opening and 1 SIP happen in the same month.
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The views expressed herein are the personal views of the author. The views constitute only the opinions and do not constitute any guidelines or recommendation on the course of the action to be followed. These are not necessarily the views on Reliance Capital Asset Management Ltd. Neither the AMC, the trustees, the Fund nor any of their affiliates or representatives assume any responsibility/liability for the accuracy of such information provided herein. Sponsor: Reliance Capital Limited. Trustee: Reliance Capital Trustee Co. Limited. Investment Manager: Reliance Capital Asset Management Limited. The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956. Investment Objective: Reliance Growth Fund (An Open Ended Equity Growth Scheme): The primary investment objective of the scheme is to achieve long-term growth of capital by investing in equity and equity-related securities through a research-based investment approach. General Risk Factors: Mutual Funds and Securities Investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the capital markets. Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme. The names of the Schemes launched by Reliance Mutual Fund (as mentioned above) 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. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs. 1 lakh towards the setting up of the Mutual Fund and such other accretions and additions to the corpus. The Mutual Fund is not guaranteeing or assuring any dividend/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 availability of distributable surplus. For details of Scheme features apart from those mentioned above and scheme-specific risk factors please refer to the provisions of the Offer Document/Scheme Information Document. Offer Document/Scheme Information Document and Key Information Memorandum cum Application Forms are available at AMC office/Investor Service centres/AMC website/Distributors. Please read the Offer Document/Scheme Information Document carefully before investing.