The conventional wisdom surrounding systematic investment plans (SIPs) often paints them as dull and uneventful. However, we’re thrilled to introduce compelling solutions that redefines the investment landscape and empowers you to break free from the monotony (and at the same time create more wealth).

Our team has meticulously crafted three distinct SIP strategies designed to optimize returns and minimize risk. Each strategy leverages different mechanisms to ensure that your investments yield exceptional results.

A. Step-Up SIP: Gradual Growth with Every Year:

Our Step-Up SIP strategy introduces a controlled increase in investment amount year by year. This gradual escalation, by 10% annually, ensures a steady progression of your investment journey. For instance, an initial monthly SIP of Rs. 10,000 will evolve to Rs. 11,000 in the subsequent year, and further to Rs. 12,100 in the second year, and so forth. This incremental approach is tailored to align with your financial growth trajectory.

B. Dynamic SIP: Seizing Opportunity Amidst Volatility

Our Dynamic SIP strategy capitalizes on market volatility to optimize returns. Whenever the Net Asset Value (NAV) of the fund experiences a 10% correction, the monthly investment amount is doubled until the fund’s NAV regains its original value. For instance, a Rs. 10,000 monthly SIP could potentially surge to Rs. 20,000 if the fund’s NAV corrects by 10% and subsequently recovers to its original NAV. This strategy allows you to harness market downturns for greater gains.

C. Combination of Step-Up + Dynamic SIP: The Best of Both Worlds

Our Combination Step-Up + Dynamic SIP strategy amalgamates the benefits of controlled annual increments and market-responsive doubling. With this strategy, your SIP amount increases by 10% each year, and in addition, doubles when the fund’s NAV corrects by 10%. This synergistic approach optimally balances consistent growth with capitalizing on market dynamics.

Empirical Validation: Nippon India Growth Fund (erstwhile Reliance Midcap Fund) Backtesting

To substantiate the efficacy of our innovative SIP strategies, we conducted rigorous back testing using one of India’s oldest midcap funds, the Nippon India Growth Fund* (inception date: October 08, 1995). The results were nothing short of remarkable.

A conventional SIP approach with this fund since inception would have yielded the following outcomes:

However, the three approaches highlighted above yielded the following results:

In conclusion, our innovative SIP strategies offer a dynamic perspective on wealth accumulation, each tailored to suit your risk appetite and financial objectives. The empirical validation of these strategies using Nippon India Growth Fund underscores their potential to yield exceptional results.

As Warren Buffet famously stated, “Investing is simple but not easy.”

This principle holds true when examining the historical performance of the Nippon Growth Fund, which endured significant corrections of up to 50% during key market events [Dot Com Burst (2001), Global Financial Crises (2008), and COVID-19 (2020) and prolonged periods of minimal returns (2000-2004, 2010-2014, and 2017-2020). Remarkably, despite these challenges, the fund has delivered an impressive annualized return of close to 21%. This echoes Buffet’s wisdom to seize opportunities amid market fluctuations, as well as his counsel to be cautious when others are exuberant and bold when others are apprehensive.

*The decision to exclude Nifty/Sensex from our backtesting analysis was predicated on our perspective that over an extended temporal scope, Midcaps are poised to exhibit superior performance in comparison to Nifty/Sensex. This assessment is grounded in the belief that Midcaps present a more favorable risk-reward proposition than both smallcap and the Sensex/Nifty index.

Strong growth since liberalization (1991)

While the GDP has grown by 12 times, market capitalisation of top 100 listed companies has grown by 46 times.

Jio’s Bajaj Finance moment?

Finally, the shares of demerged Jio Financial Services (‘Jio’) have been credited to the demat accounts of the Reliance Industries shareholders and are expected to list on August 28, 2023.

Currently, Jio holds the 51st position among the stocks listed on the Nifty 50, with a demerged price of Rs. 261.85. Investors hold a sanguine outlook concerning Jio’s prospective growth trajectory, anticipating a parallel course with that of India’s prominent Non-Banking Financial Company (NBFC) – Bajaj Finance.

Bajaj Finance has recorded an impressive increase in its Assets Under Management (largely comprising loans), surpassing the threshold of Rs. 2.7 lac crore (a substantial augmentation from Rs. 1000 crore in 2006), reflecting an annual growth rate of 39%. The exponential 410-fold surge in Profits After Tax (PAT) has propelled the stock price to an astonishing ascent of 130,000% (equivalent to 1300 times) within the same period.

Jio has strategically formulated plans to disrupt the financial services sector, encompassing domains such as life and general insurance, stock broking, and asset management. It has already established a collaborative endeavor with the world’s largest asset manager, BlackRock. Investors’ optimism towards Jio can be attributed to several factors:

Robust Distribution Network: Jio is poised to tap into an existing captive audience, leveraging the extensive reach of its telecom services, which cater to around 400 million users. Additionally, the annual footfall of approximately 800 million patrons at Reliance Retail stores and the integration of 2 million merchants on the JioMart grocery platform bolster its distribution prowess.
Esteemed Management Team: Jio has strategically appointed eminent individuals to steer its new venture, including:
- Mr. KV Kamath, the former Chairman of Infosys, and erstwhile Non-Executive Chairman of ICICI Bank,
- Mr. Rajiv Mehrishi, the former Comptroller and Auditor General of India (CAG),
- Mr. Hitesh Sethia, former Chief of McLaren Strategic Ventures.
Strong Credit Rating and Access to Cost-Effective Capital: With Reliance’s backing, Jio benefits from an enviable AAA credit rating, a distinction shared by only five other prominent Non-Banking Financial Companies (NBFCs).
Favorable Valuation: Jio’s possession of approximately 6% equity in Reliance Industries translates to an initial net worth exceeding Rs. 1 lakh crore. This valuation propels Jio to the position of the fifth-largest financial services entity in India, trailing closely behind established banking giants such as HDFC, SBI, ICICI, and Axis.
Substantial Resources for Expansion: Reliance Industries (RIL) has seamlessly transferred Rs. 15,500 crore in cash and liquid investments to Jio, equipping it with ample resources for expansion.

The underlying opportunity that Jio seeks to seize is vividly illustrated in the chart below. Over the last quarter-century, Indians have accumulated USD 12 trillion in savings, with an anticipated additional savings of USD 103 trillion (a remarkable increase by a factor of 90) projected ahead. This landscape presents a colossal opening for NBFCs such as Jio and Bajaj Finance to capitalize upon.

Quote of the month

Successful investing is investing that lets you sleep peacefully at night.

Success is not about who makes the highest returns or who makes the most money. It is about achieving our financial goals in a timely manner with the lowest possible risk.

-Gautam Baid, The Joys of Compounding

From the global leaders:

“India set to dominate emerging markets as breakout star of the decade”: Capital Group report
“India is on track to replace China as the world’s factory”: Anand Mahindra
“India Pips China As Most Attractive Emerging Market For Investing”
“India is said to be an ‘oasis’ in the desert”: CNBC
“This will be India’s decade, stars are well-aligned”: Rahul Jain, BCG India

The Indian macro dataflow has continued to exhibit resilience and strength across various key indicators:

Manufacturing PMI: In July 2023, the Manufacturing Purchasing Managers’ Index (PMI) registered a value of 57.7, marking a decline to a three-month low. However, it remained within the expansion zone (>50) for the 25th consecutive month. This sustained expansion was underpinned by new orders’ growth, which reached its highest level since November 2022.
Services PMI: The Indian Services PMI achieved an impressive milestone, reaching a 13-year high level of 62.3. This robust performance was buoyed by strong demand, both domestically and in the export sector.
GST Collection: July 2023 witnessed GST collections amounting to Rs. 1.65 trillion, reflecting an 11% year-on-year increase. This achievement marked the seventeenth consecutive month of collections surpassing the Rs. 1.4 trillion threshold. It follows the record-setting collections of Rs. 1.87 trillion in April 2023.
Credit Growth: As of July 14th, 2023, credit growth surged beyond 14% year-on-year, a notable advancement from the 12.9% year-on-year growth recorded on July 15th, 2022.
Inflation: The Consumer Price Index (CPI) inflation rate for June 2023 displayed a rise, marking the first increase in five months, with a value of 4.81%, up from 4.25% in May 2023. This elevation was influenced by a less favorable base and an uptick in food inflation rates (+4.49%). Notably, the rate remains situated below the upper tolerance band of 6% set by the Reserve Bank of India (RBI).
Foreign Exchange Reserves: India’s foreign exchange reserves experienced a decrease by $2.901 billion, settling at $593.198 billion.
Trade Deficit: May 2023 witnessed a decline of -22% year-on-year in Indian Merchandise Exports, which amounted to $32.97 billion. Imports also underwent a contraction of -17.5% year-on-year, reaching $53.10 billion. As a result, India’s trade deficit narrowed by 8.7%, amounting to $20.13 billion. This trade scenario was influenced by weakened global demand, leading to exports reaching an eight-month low.

Collectively, these indicators portray a dynamic economic landscape, characterized by both accomplishments and challenges, as India navigates through evolving global dynamics and domestic circumstances.

Downs are temporary, ups are permanent:

Equity Market Overview:

In the month of July, the BSE SENSEX exhibited a notable rise of 2.8%, a trend mirrored by various other Indian indices.
The BSE Mid-cap and small-cap indices notably outperformed the SENSEX, recording gains of +5.7% and +7.4%, respectively.
The bullish sentiment witnessed in Indian indices was partly propelled by Foreign Institutional Investor (FII) flows. FIIs continued their engagement as net buyers of Indian equities in July, although at a reduced volume of +$4.2 billion, following a previous inflow of +$5.3 billion in June.
Sector-wise, all segments, with the exception of consumer durables, concluded the month on a positive note. Public Sector Undertakings (PSUs), power, and realty sectors notably stood out with substantial growths of +9.3%, +9.2%, and +9%, respectively. Conversely, consumer durables experienced a marginal decline with a degrowth of -0.3%.
Mutual Funds’ Systematic Investment Plans (SIPs) achieved an unprecedented milestone, reaching Rs. 15,245 crore for the first time. This highlights the strong confidence Indian investors have in equities.

Fixed Income Landscape:

In its July meeting, the Monetary Policy Committee (MPC) opted to maintain all rates unchanged while retaining the stance as ‘withdrawal of accommodation.’
Government Securities (Gsec) yields remained within a certain range over the month, influenced mainly by global news developments. Gsec closed the month at 7.17%, a modest increase from June’s 7.11%, May’s 6.99%, and April’s 7.12%.
Core liquidity, which began the financial year at 0.5% of Net Demand and Time Deposits (NDTL), saw robust improvement due to factors such as RBI dividends, RBI’s intervention in forex markets, the demonetization of 2000 rupee notes, and seasonal patterns. Presently, core liquidity comfortably stands at around 2% of NDTL.

Market Outlook:

Recent updates in Indian macroeconomic data continue to showcase the economy’s resilience.
Supported by strong fundamentals and ongoing structural reforms, the economy is poised for a potential upswing in the long run.
Favorable demographics and demand dynamics contribute positively to the economic outlook.
While the long-term structural story remains intact, short-term volatility could arise from global growth-inflation dynamics and evolving geopolitical factors.
Valuations remain relatively high, and the business cycle maintains its positive momentum.
Considering a comprehensive analysis of the aforementioned indicators, it is deduced that the markets are currently in a “Boom” phase.
A positive stance is maintained for sectors aligned with the domestic economy, such as Banks, Automobiles, Capital Goods, and Manufacturing. The pharmaceutical sector also appears promising due to reasonable valuations.

Track your Portfolio

Month: August 2023

Your Antidote to Boring SIPs

MONTHLY MARKET UPDATE & OUTLOOK – JULY’23

Strong growth since liberalization (1991)

Quote of the month

Downs are temporary, ups are permanent:

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