A Reliance Capital Company Month 00 2006 Why earn? Why Invest?

A Reliance Capital Company

Month 00 2006

Why earn?

Why Invest?


The Objective

Wealth Creation


Comparative returns for the last 20 yearsWhat $1000 invested at the end of 1986would be worth at the end of 2006? Instrument Value Average Annual Return Stocks (S&P500) $9310 11.80% Real Estate $8540 11.32% Commodities $6510 9.82% International Stocks $5020 8.40% Inflation (CPI) $1820 3.05% Gold $1550 2.23%


Month 00 2006

Power of Equity

Unbelievable

but it has happened


Just imagine…

• How much can you make in 26 years by just investing Rs.10,000 initially in any of financial instruments ?

• Take a wild guess ???

• Let us look at the real example…


If you have subscribed in 100 shares of ________ company with a face value of Rs. 100 in 1980…

• In 1981 company declared 1:1 bonus = you have 200 shares• In 1985 company declared 1:1 bonus = you have 400 shares• In 1986 company split the share to Rs. 10 = you have 4,000 shares• In 1987 company declared 1:1 bonus = you have 8,000 shares• In 1989 company declared 1:1 bonus = you have 16,000 shares• In 1992 company declared 1:1 bonus = you have 32,000 shares• In 1995 company declared 1:1 bonus = you have 64,000 shares• In 1997 company declared 1:2 bonus = you have 1,92,000 shares• In 1999 company split the share to Rs. 2 = you have 9,60,000 shares• In 2004 company declared 1:2 bonus = you have 28,80,000 shares• In 2005 company declared 1:1 bonus = you have 57,60,000 shares


At the end of 2005…

• You have 57,60,000 shares of the company

• Any guess about the company ? • (Hint : Its an Indian company)

• Any guess about the present valuation ?


The result of ‘Power of Compounding’

Your present valuation is about

Rs. 200 Cr.+

&

The company is ‘WIPRO’


Other such examples…

CIPLAInvestment of Rs. 10,000 in 1979 will fetch Rs. 95 cr.+

INFOSYSInvestment of Rs. 10,000 in 1992 will fetch Rs. 1.5 cr.+

RANBAXYInvestment of Rs. 1000 in 1980 will fetch Rs. 1.9 cr.+


Month 00 2006

Basics of Equity Markets


Stock Market ============== Mandi

Buyer Buyer Buyer

Seller

Seller Seller Seller

Buyer

Seller’s Price – Higher offer

Buyer’s Price – Lower Offer

Buyers and Sellers come together


Stock Exchange (BSE / NSE)

Broker Broker

Sub- Broker Sub- Broker

Client Client


Depository (NSDL / CDSL)

Depository Participant Depository Participant

Client Client

Delivery Based (Primary and Secondary Markets)


Sub broker Depository Participant Bank

Client

Off-line Model


Broker(Reliance Securities)

Sub broker Depository Participant Bank

(R Money Franchisee) (Reliance Capital) UTI, IDBI, HDFC, Offline CMS

Reliance Money

Client

On-line ModelReliance Money


Margin Trade

Scenario 1

Company A

Market Opens 10 am

Share Price: Rs. 100/-

Buy 100 shares

Total Investment Rs. 10000/-

At 2 pm

Share Price : Rs. 120/-

Sell 100 shares

Profit: Rs. 2000/-

Return on investment: 20%


Margin Trade

Scenario 2

Company A

Market Opens 10 am

Share Price: Rs. 100/-

Buy 100 shares

Total Investment Rs. 2000/- Broker provides Rs. 8000/-

At 2 pm

Share Price : Rs. 120/-

Sell 100 shares

Profit: Rs. 2000/-

Return on investment: 100%


Services Available

• Equities – Delivery, ATST, Margin

• Futures and Options

• IPO's online

•Research Inputs – Dow Jones, Saans

•Trading Ideas – Sachin Chavan, Deepak Mohini

•Overseas Equities, Commodities, Currency combinations.


Target Clients

Existing Market

• Traders

• Investors

• IPO Applicants

New Market

•MF Investors

•ULIP Investors

•Debt Market – FD Invetors


Futures

Contract

Current Share Price Rs. 100Market assessment of value on last Thursday: Rs. 120/-

Contract Value Rs. 120/-

My Assessment: Rs. 125/-

I ‘ll buy the contract.

Counter Party Assessment: Rs. 115/-

Counter party sells contract

On last Thursday Price is Rs. 121: Buyer Gains.

On last Thursday Price is Rs. 118: Seller Gains.


Thank You

Documents

A Reliance Capital Company Month 00 2006 Why earn? Why Invest?