Professional Documents
Culture Documents
Table Of Contents
India Opportunity
Investment Strategy
Positioning
Product Features
India Moving Towards Higher Growth Trajectory
India took 60 years to get to its first USD 1 Trillion GDP in FY08,
FY08 but the move to USD 2
Trillion GDP will be in next 5-6 years, similar to that of China
Due to the huge consumption and savings/investment boom, USD 2 Trillion GDP is not a
destination, but a milestone in India’s ongoing
g g jjourney
y towards USD 4 Trillion GDP in the
subsequent 5-7 years, and so on
Estimated for 2010-2014
Source: CMIE, MOSL, RCAM Estimates
Emerging Markets To Attract Higher Inflows
Period 1995-99 2000-04 2005-09 2009 Growing size of EM economy and
Avg. World GDP $Bn 30,292 35,291 53,583 57,228
fading distinction between EM
Proportion of the World Average GDP level (%)
DM countries 80.4 79.5 72.2 69.3 and DM economies should lead to
US 27.6 30.5 25.7 24.9 increased capital allocation to EM
UK 4.4 4.9 4.6 3.8
economies
Euro area 23.2 21.4 22.1 21.5
Japan 14.8 12.2 8.7 8.8
Period 1995-99 2000-04 2005-09 2009
EM countries 19.6 20.5 27.8 30.7
Avg.World M-Cap 14,047,039 17,734,308 25,689,296 24,630,640
Brazil 2.6 1.7 2.4 2.6
Proportion of the Average World M-Cap (%)
Russia 1.0 1.1 2.2 2.2
DM markets 94.1 95.3 90.1 86.8
India 2.2 1.5 1.9 2.2
United States 46.6 51.9 44.3 42.5
China 3.1 4.3 6.5 8.3
United Kingdom 9.7 10.4 9.6 9.0
South Africa 0.5 0.4 0.5 0.5
Europe (ex-EM) 30.0 29.1 29.0 27.3
Japan 13.8 9.0 9.5 8.6
Presently, EM economies hold over 30%
Presently EM markets 5.9 4.7 9.9 13.2
share in Global GDP, while their share in Brazil 0.7 0.4 1.3 2.2
Global market cap is only 13% Russia 0.2 0.2 0.8 0.8
India 0.4 0.3 0.7 1.0
China 0.0 0.3 1.5 2.4
K
Korea 06
0.6 08
0.8 14
1.4 17
1.7
MSCI Indices used as proxy for market-cap data (Units: USD million)
Source: IMF GDP data, MSCI m-cap data, RCAM Estimates, DM : Developed Markets, EM: Emerging Markets
Investments Will Flow To India
USD (Trillion) CY2008 CY2014
BRIC
GDP 8.29 16.36
Market Cap 5.61 16.36
FII Investments* 1.00 ??
US
GDP 14 20
14.20 16 47
16.47
Market Cap 12.09 16.47
FII Investments* 10.64 ??
In 2014,
2014 BRIC
BRIC’ss combined GDP will be equal to US GDP
At Market Cap GDP ratio of 1, BRIC countries will have a market cap of USD 16.36
Trillion
Significant FII money will flow into the BRIC markets – India will gets its share of
investments
Source - RCAM Estimates, *FII numbers are approximations, BRIC – Brazil, Russia, India, China
Investment Outlook
Currently market is evenly poised with positive bias
India has emerged stronger from the global slump and is back on track to grow in excess
of 7-8% per annum
For a sustained long term growth, the 3 growth drivers are in place:
Big valuation disparity among large, mid caps & small caps. Opportunity for alpha
creation
Stock selection will be the key Source: Bloomberg, RCAM Estimates
Why Invest In Small Caps?
Key Benefits Of Investing In Small Caps
Emergence Of Small Caps To Large Caps
Today’s
Today s Small …Are Tomorrow’s
Tomorrow s Potential
Caps …. Which May Eventually
Mid Caps, Become Large Caps
Institutional Very
Ownership Moderate Large
Limited
Valuation Multiple
p
Low Moderate Fair
Entrepreneurial Passion
Indian entrepreneurial skills / mindset / spirit has been globally acknowledged over a
period of time
End
E d off License
Li R j has
Raj h opened
d many business
b i opportunities
t iti forf entrepreneur
t
Multiple sources of fund raising at various stage of business has been of tremendous
help
p
new business opportunities that will not only survive in a recession but will also thrive
Thus,
Th E
Emerging
i India
I di is
i offering
ff i various
i growth
th opportunities
t iti to t entrepreneurs,
t b it first
be fi t
generation entrepreneur or otherwise
Emerging Sectors Offer Opportunities For Growth
In a developing economy like India, multiple sectors provide opportunities for growth
Thus, emerging sectors are true reflection of entrepreneurial spirit, new opportunities
Niche focus & ability to attract talent Emerging Sectors start small –
as on August 2010
Source: www.bseindia.com, 5th August 2010 , Index Market Cap Range given implies companies with the smallest market cap and largest market cap in that particular
indices respectively as on August 5, 2010. Small Cap stocks for the purpose of the Reliance Small Cap Fund are stocks whose market capitalization is in between the
highest and lowest market capitalization of companies on BSE Small Cap Index
The Indian Small Cap Opportunity
Performance Over The Last 2 Years (31st July 08 - 30th July 10) Valuation As On 31st July 2010
Outperformance of I d
Index P/E P i To
Price T Book
B kV Value
l
Index CAGR (%) BSE SMALL CAP
Relative To Indices S&P CNX Nifty 22.31 3.78
S&P CNX Nifty 11.32 5.00 BSE SENSEX 21.20 3.40
BSE SENSEX 11.58 4.74 BSE MIDCAP 19.24 2.90
BSE MIDCAP 15.37 0.95 BSE SMALL CAP 15.66 2.34
BSE SMALL CAP 16.32
Source : www.bseindia.com, Capitaline Neo as on 6th August 2010
Small Caps are still available at better valuations compared to Large Caps
E
Examples
l off how
h Small
S ll Cap
C companies i have
h emerged
d
as Large Cap companies over a period of time
creating wealth for the shareholders
The companies chosen herein are purely for illustrative purpose only
Reliance Mutual Fund or Reliance Small Cap Fund may or may not invest in the shares of these companies
The investment decision of Reliance Mutual Fund to invest in any company is based on several factors including
research, market potential, future outlook etc
Retailing
Market Capitalization Market Capitalization
(July 30th 2001) (July 30th 2010) Outperformance relative to
Company Name BSESENSEX
(Rs. Cr) (Rs. Cr) (July 30th 2001- July 30th 2010)
P
Pantaloon
l Retail
R il (India)
(I di ) 19 98
19.98 9457 13
9457.13 19 316%
19,316%
PAT
Rs.140.58 Crs
(30th June 2009)
PAT
Rs.6.40 Crs
(30th June
J 2001)
U i h
Unitech 72 44
72.44 20 457 53
20,457.53 17 550%
17,550%
PAT
Rs.1,195.53 Crs
(31st March
M h 2009)
PAT
Rs.13.57 Crs
(31stt March
M h 2003)
Ed
Educomp Solutions
S l i 447 20
447.20 5 797 46
5,797.46 904%
PAT
Rs.140.33 Crs
(31st March 2009)
PAT
Rs.14.00 Crs
(31st March 2006)
A ll Hospitals
Apollo H i l 715 31
715.31 4 841 08
4,841.08 20%
PAT
Rs.130.03 Crs
(31st March 2010)
PAT
Rs.30.92 Crs
(31st March 2002)
Z d Wellness
Zydus W ll 2 31
2.31 2 015 23
2,015.23 9 924%
9,924%
PAT
Rs.46.71 Crs
(31st March 2010)
PAT
Rs.0.94 Crs
(31stt March
M h 2003)
Small Cap investing is all about stock selection rather than asset allocation
Size of opportunity
Limited research
However the sharp volatility subsides over a longer period and makes way for
higher profitability
Reliance Mutual Fund Advantage
Our Expertise
Bottom up approach has been strongly advocated as the key investment strategy of
Reliance Mutual Fund.
Fund
Well-experienced team of investment professionals having
Collective experience of over 150 years in Indian equities
Most members individually tracking Indian equity markets for well over 15 years
In depth research capabilities to identify small caps with huge growth potential
Our research capability empowers the Fund Manager to be BOLD in identifying high
growth potential stocks & manage the RISK associated with it
Only fund in RMF’s product basket with a pre-dominant investment focus on small
cap companies where stock selection would play a key role
Past Performance may or may not be sustained in future
Reliance Mutual Fund
Presents
Reliance Small Cap Fund
A Fund With
A Very Aggressive Investment Style
Investment Philosophy
With an endeavor to maximize returns & minimize risks by reasonable diversification ,
I
Investment
t t in
i Debt
D bt & Money
M M k t Securities
Market S iti : 0% - 35%*
Small cap stocks, for the purpose of the fund are defined as stocks whose market
capitalization
p is in between the highest
g & lowest market capitalization
p of companies
p
on BSE Small Cap Index
* Please refer detailed asset allocation on slide no 29. Market Capitalization: Market value of the listed company, which is
calculated by multiplying its current market price by number of its shares outstanding
Positioning Of Reliance Small Cap Fund
Returns
Reliance Small
High
Ri k
Risk C F
Cap Fund
d
Medium
Low
A relatively high risk/high return oriented fund characterized by volatility which will get
Reliance Small Cap Fund will be a vital part of an investor’s core portfolio that aims to
Equity & equity related securities of small cap companies including derivatives#
- 65%-100%
65% 100%
Equity & equity related securities of any other companies including derivatives#
Proposed Asset - 0%-35%
Allocation Debt & Money Market Securities **(including investments in securitised debt)
- 0% - 35%
** including securitised debt up to 30%
# The Scheme proposes to invest at least 65% of the corpus in Equity & equity related instruments of small cap
companies which may go upto 100% of the corpus. The investment in Equity & equity related instruments of
any other companies other than small cap companies will be in the range of 0-35% of the corpus
F d Manager
Fund M Sunil Singhania
A R C