Investment Mantra

Equities as an asset class & Investor behaviour **

Equities are a volatile asset class. However volatility in returns reduces as holding period
increases. Good times and bad times, typically follow each other

Returns from Equity investment is a function of earnings growth and changes in valuation

Investors generally invest more in good times when valuations are rich (high PE) and refrain
in bad times when valuations are cheap/reasonable (low PE). This leads to unsatisfactory
returns

On investments made in bad times(where PE <15), typically returns over next 3 years or
more are better due to earnings growth & improvement in valuation
(**illustrated in the table overleaf)

Mantra for Investing in Equity Mutual Funds:

Equities help create wealth over long term

Enjoy the benefit of diversification by investing in equity mutual funds

Take advantage of Ups and Down in the market by regularly investing systematically

Rely on professional money managers with sound track record

To know more, visit www.hdfcfund.com/InvestorEducation or contact your financial advisor.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

Why Invest in bad times...

S&P BSE SENSEX Yearly Rolling Returns vis-a-vis Equity Inows in Mutual Fund Schemes at different valuations across different time periods

Any person invested or planning to invest in the equity markets in India needs to evaluate the following table and summarise its results.
S&P BSE SENSEX Returns

1 YEAR
Forward P/E

Equity Net
Inows for the
Year (Rs. in Cr)*

Absolute 1 Yr

CAGR 3 Yrs

(3)

(4)

(5)

(6)

(7)

(8)

(9)

100
129
173
218
212
245
354
574
510
398
714
781
1168
4285
2281
3779
3261
3367
3361
3893
3740
5001
3604
3469
3049
5591
6493
11280
13072
15644
9709
17528
19445
17404
18836
22386

NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
13.2
40.6
15.7
19.9
24.7
23.3
20.6
24.6
19.7
24.2
15.8
12.1
9.2
12.4
12.0
15.9
15.4
20.3
12.1
17.7
17.4
14.2
14.0
14.4

NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
10,058
22,161
8,763
118
7,205
7,398
36,155
29,916
52,701
4,084
1,456
-11,795
504
-14,371
-11,255

29%
35%
26%
-3%
16%
44%
62%
-11%
-22%
79%
9%
50%
267%
-47%
66%
-14%
3%
-0.2%
16%
-4%
34%
-28%
-4%
-12%
83%
16%
74%
16%
20%
-38%
81%
11%
-10%
8%
19%
N.A.

30%
18%
12%
18%
39%
28%
4%
8%
15%
43%
82%
43%
48%
-9%
14%
-4%
6%
4%
14%
-3%
-2%
-15%
16%
23%
55%
33%
34%
-5%
10%
8%
21%
2%
5%
N.A.
N.A.
N.A.

20%
22%
27%
19%
13%
24%
17%
15%
53%
42%
40%
33%
24%
-5%
11%
-0.2%
9%
1%
1%
-5%
8%
5%
26%
30%
39%
12%
22%
12%
6%
4%
18%
N.A.
N.A.
N.A.
N.A.
N.A.

22%
20%
21%
35%
27%
31%
25%
19%
21%
26%
18%
20%
12%
-2%
3%
4%
7%
13%
15%
15%
10%
13%
18%
18%
20%
15%
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.

Sr. No.

Investment
made at
YEAR END

S&P BSE
SENSEX

(1)

(2)

0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35

Mar-79
Mar-80
Mar-81
Mar-82
Mar-83
Mar-84
Mar-85
Mar-86
Mar-87
Mar-88
Mar-89
Mar-90
Mar-91
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14

CAGR 5 Yrs CAGR 10 Yrs

SENSEX returns are computed for 1,3,5 & 10 years from the date of investment. Source: BSE Ltd, AMFI. 1 Year forward P/E - Source: CLSA. NA - Not Available. /N.A.- Not Applicable.
* Net Inows in Equity Mutual Fund Schemes: Equity, Balanced, ELSS. Period having P/E less than 15 is highlighted for reference. CAGR: The rate at which an investment grows annually over a
specied period of time.
Column 3: shows the value of SENSEX at the end of month of the respective period. Column 4: shows the 1 year Forward Price to Earnings ratio: It is the ratio of SENSEX with the future estimate
earnings of the companies listed in the SENSEX. Column 5: Represents the net inows in equity mutual funds for the year.
Column 6 to 9: Represents the return earned on the investment for the referred period. For e.g. If you invested in Mar-79 when SENSEX Index was 100, then 1 year returns (in Mar-80) would have
been 29%, 3 years returns (in Mar-82) would have been 30%, 5 years returns (in Mar-84) would have been 20% and 10 year returns (in Mar-89) would have been 22%.

To know more, visit www.hdfcfund.com/InvestorEducation or contact your financial advisor.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.