A

PROJECT REPORT
ON
“Last 5 years Returns from various asset classes in India”

Submitted to

SCHOOL OF PETROLEUM MANAGEMENT (SPM)

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE
DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

AT
PANDIT DEENDAYAL PETROLEUM UNIVERSITY
PDPU – GANDHINAGAR

UNDER THE GUIDANCE OF

Faculty Mentor

Dr. Narayan Baseer

Submitted by
Bhavin Patel (20185009)
1. BACKGROUND OF VARIOUS INVESTMENT CLASSES IN INDIA
1.1 -Introduction
An asset class is a collection of securities, manifesting comparable traits and goes through similar market
fluctuations. Securities in one asset class are almost always bound by similar legalities. Experts put different
investment tools in various asset classes to help investors diversify their portfolio easily. Risk factors,
taxation, return rates, liquidity, tenures and market volatility differ according to asset classes. Hence,
investors often rely on asset category diversification to earn maximum returns with minimal costs.

1.2 -Types of Asset Classes

There can be numerous criteria to classify asset classes. You may classify them based on purpose i.e.
whether it is a consumption asset like oil and natural gas or whether it is an investment asset like stocks and
bonds. You may also categorise them on the basis of location or the markets like domestic securities, foreign
or international investments, or emerging markets and developed markets.

However, for now, let us dive into the popular asset classes and explore their distinct characteristics and
unique selling propositions.

 Fixed Income: As the most popular among Indians, fixed income asset class is one of the most
trusted and oldest forms of investments. Fixed deposits and public provident funds (PPF) are two
examples of this. But is this an investment though? You are just letting the bank borrow from you
under conditions of capital protection, returns in the form of pre-agreed returns and liquidity.

With zero risks attached to fixed income asset classes, you will not lose the money you invest. And
you earn steady returns as promised at the time of investing. You may get 7%-8% returns on Fixed
Income schemes, but they are not inflation-beating returns. Subject to STCG or LTCG as per the
tenure, fixed income schemes only offer security and not wealth-growth.

 Equity: Equity asset class is a fascinating one and has been gaining popularity in the recent years.
Investing in equity means to buy into a business – when you buy shares of a firm, you have a
percentage of ownership. The only hitch is that it comes with a certain amount of risk. Any business
takes time to grow and it is subject to market fluctuations, which can impact the share price.
Among equity investments, Equity Linked Savings Scheme (ELSS) is the only tax-saving (under
section 80-C) and wealth-building scheme with the shortest lock-in term of 3 years. But equity
investments (including ELSS) work well when you invest for the long term as they have historically
delivered 16%-18% returns and rising above inflation. Choose an AMC with a proven record, if you
are planning to invest in equities.
 Real Estate: Real estate asset class, as the name implies, focuses on plots, apartments, commercial
buildings, industrial areas, villas etc. The millennium has witnessed a growing interest in real estate
investments, exacerbated by the launch of Pradhan Mantri Awas Yojana i.e. house for all scheme.
This is not just in urban areas, but in semi-urban and rural regions too. However, property market can
be rather unpredictable and there are numerous factors like city planning, socio-political scenes, and
project movement that decide the returns. This is one asset class that is not always structured or
monitored.

 Commodities: Commodities can be anything ranging from goods, properties or products that can be
traded for different purposes. Gold, silver, bronze, food crops, petroleum etc. are some examples of
commodities under the asset class, and the market undercurrents vary for each. The price can rise or
fall as per the demand. Merchandises are not meant for long-term investments unless it is gold or
silver. Just buy when the prices are down and sell when the prices go up.

 Cash and Cash Equivalents: These are also known as money market instruments. It is not confined
to currency, but also idle money in savings account or any other liquid schemes. Nothing gives more
transactional freedom than cash. Many people are reluctant to invest money except in savings
account because they don’t have faith in any investment schemes or to use it without any restrictions
at any time. But it cannot beat inflation and the returns too are negligible (not more than 4%). People
often store away cash to evade tax as they are untraceable.

 Derivatives: A derivative refers to a financial security whose value depends on the underlying asset
or group of assets. Standalone, the derivative has n value of its own and its price is based on the
fluctuations in the price of the underlying asset. It is a kind of contract between two or more parties
who have a right/obligation to perform according to the conditions of the contract. Commonly used
underlying assets are equity shares, bonds, debt, foreign exchange, commodities, market indices and
interest rates.

 Alternative Investments: An alternative investment relates to an unconventional asset and is not one
of the traditional asset classes like equity, debt, and cash. These are mostly held by institutional
investors or high net worth individuals owing to their complex structure and limited regulations.
These attempt to generate exceptionally huge returns but are highly illiquid and risky at the same
time. Some of the alternative investments found in the capital markets are hedge funds, bitcoins,
artworks and structured products.
2. Returns from Equity Mutual Funds
Multi-cap funds
Returns from these diversified mutual funds have exceeded inflation by a wide margin, across time periods.

Multi Cap Fund (Cat Avg)

5 Years 10 Years 15 Years

CAGR (%) 16.25 18.30 16.65

10.16<
Inflation Adjusted CAGR (%) 11.31 10.89

Large-cap funds
Returns from these relatively less volatile equity funds have comfortably beaten inflation over the years.

Large Cap Fund (Cat Avg)

5 Years 10 Years 15 Years

CAGR (%) 13.60 15.82 15.69

9.20
Inflation Adjusted CAGR (%) 8.66 8.41

Mid-cap funds
Returns from these high-risk, high-reward equity schemes have been much higher compared to infl ation and other
equity funds

Mid Cap Fund (Cat Avg)

5 Years 10 Years 15 Years

CAGR (%) 20.29 20.85 17.53

13.44
Inflation Adjusted CAGR (%) 15.35

Small-cap funds
While small-caps too have beaten inflation across time periods, their returns have been quite volatile.
Small Cap Fund (Cat Avg)

5 Years 10 Years 15 Years

CAGR (%) 21.64 19.77 10.67

4.18
Inflation Adjusted CAGR (%) 16.70 12.36

3. Returns from Gold

Though gold failed to beat inflation over a 5-year period, it has delivered positive inflation-adjusted returns over
longer periods.

Standard Gold - Mumbai

5 Years 10 Years 15 Years

CAGR (%) 0.61 9.29 11.71

Inflation Adjusted CAGR (%) -4.33 1.88 5.22

4. Returns from Real Estate

Returns from real estate will be below inflation even after considering the average rental yield of 1.5%.

Residential Real Estate - Top 7 Cities

5 Years 10 Years 15 Years

Capital CAGR (%) 3.00 3.00 4.00

Inflation Adjusted CAGR (% )

-1.94 -4.41 -2.49

REFERANCE
 https://economictimes.indiatimes.com/wealth/invest/returns-from-which-
investments-have-beaten-inflation-heres-a-
comparison/articleshow/66781580.cms?from=mdr
 https://economictimes.indiatimes.com/wealth/invest/top-10-investment-
options/articleshow/64066079.cms?from=mdr