Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
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Motilal Oswal Dynamic Fund (Div-A) - 12.7364Motilal Oswal Dynamic Fund (Div-Q) - 11.9304Motilal Oswal Dynamic Fund (G) - 13.54Motilal Oswal Dynamic Fund-Dir (Div-A) - 13.0214Motilal Oswal Dynamic Fund-Dir (Div-Q) - 11.9237Motilal Oswal Dynamic Fund-Dir (G) - 14.1843Motilal Oswal Equity Hybrid Fund - Direct (G) - 12.2496Motilal Oswal Equity Hybrid Fund - Regular (G) - 11.8374Motilal Oswal Focused 25 Fund - Direct (D) - 18.41Motilal Oswal Focused 25 Fund - Direct (G) - 26.8181Motilal Oswal Focused 25 Fund (D) - 16.7011Motilal Oswal Focused 25 Fund (G) - 24.2378Motilal Oswal Large and Midcap Fund - Dir (D) - 10.18Motilal Oswal Large and Midcap Fund - Dir (G) - 10.18Motilal Oswal Large and Midcap Fund (D) - 9.9958Motilal Oswal Large and Midcap Fund (G) - 9.9957Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0081Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0593Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0325Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0096Motilal Oswal Liquid Fund - Direct (G) - 10.9026Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0077Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0578Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0314Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.0165Motilal Oswal Liquid Fund - Regular (G) - 10.8722Motilal Oswal Long Term Equity Fund (D) - 14.9474Motilal Oswal Long Term Equity Fund (G) - 16.8692Motilal Oswal Long Term Equity Fund -Dir (D) - 16.245Motilal Oswal Long Term Equity Fund -Dir (G) - 18.2384Motilal Oswal Midcap 30 Fund (D) - 17.7946Motilal Oswal Midcap 30 Fund (G) - 24.909Motilal Oswal Midcap 30 Fund-Dir (D) - 18.2986Motilal Oswal Midcap 30 Fund-Dir (G) - 27.05Motilal Oswal Multi Asset Fund - Direct (G) - 10.1277Motilal Oswal Multi Asset Fund (G) - 10.0917Motilal Oswal Multicap 35 Fund (D) - 22.8229Motilal Oswal Multicap 35 Fund (G) - 25.9054Motilal Oswal Multicap 35 Fund-Dir(D) - 22.9266Motilal Oswal Multicap 35 Fund-Dir(G) - 27.5652Motilal Oswal Nasdaq 100 FOF - Direct (G) - 18.098Motilal Oswal Nasdaq 100 FOF - Regular (G) - 17.96Motilal Oswal Nifty 50 Index Fund - Direct (G) - 9.6931Motilal Oswal Nifty 50 Index Fund (G) - 9.66Motilal Oswal Nifty 500 Fund - Direct (G) - 10.8634Motilal Oswal Nifty 500 Fund (G) - 10.7829Motilal Oswal Nifty Bank Index Fund - Direct (G) - 8.8425Motilal Oswal Nifty Bank Index Fund (G) - 8.7775Motilal Oswal Nifty Midcap 150 Index Fund (G) - 11.4739Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 11.5594Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 9.5541Motilal Oswal Nifty Next 50 Index Fund (G) - 9.5017Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 11.1296Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 11.2131Motilal Oswal S&P 500 Index Fund - Direct (G) - 11.3669Motilal Oswal S&P 500 Index Fund (G) - 11.3269Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 9.7157Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 9.734Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 9.7226Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 9.8623Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 9.7265Motilal Oswal Ultra Short Term Fund - Dir (G) - 13.7663Motilal Oswal Ultra Short Term Fund (Div-D) - 9.7192Motilal Oswal Ultra Short Term Fund (Div-F) - 9.7296Motilal Oswal Ultra Short Term Fund (Div-M) - 9.7197Motilal Oswal Ultra Short Term Fund (Div-Q) - 9.861Motilal Oswal Ultra Short Term Fund (Div-W) - 9.7226Motilal Oswal Ultra Short Term Fund (G) - 13.3865

Buy Right Sit Tight Insights - May 2017

Blog Blog Details
  • May 10, 2017
  • Raamdeo Agrawal|
  • Chairman, Motilal Oswal AMC

Dear investor friends,

The financial year 2016-17 has ended with Nifty-50 index closing around 9,200 levels. Interestingly, exactly two years ago in March 2015, the Nifty-50 touched 9,000, and closed a tad lower at 8,491. Does this mean there was no return in the market for full two years?

In this edition, I briefly discuss this and related insights.

Don’t be misled by indices

“Most people look on averages as basic reality, giving little thought to the possible variances.”
— Robert Hagstrom, in his book “Investing: The Last Liberal Art

Stock market performance is almost invariably measured by the change in popular benchmark indices – Sensex-30, Nifty-50, Nifty-500, Nifty Free Float Midcap 100, etc. The most important thing to know about these indices is that they merely indicate the average performance of their respective constituent stocks. Averages tend to conceal the variances within the data set under consideration.

The statistical perspective
Says Robert Hagstrom, in his book Investing: The Last Liberal Art, “Most of us have a tendency to see the world along the bell shape curve with two equal sides, where mean, median and mode are all the same value. But as we have learned, nature does not always fit so neatly along a normal symmetrical distribution, and sometimes skews asymmetrically to one side or the other. These distributions are called either right or left skewed, depending on the direction of the elongation.”

Hagstrom gives the following example of right skew. At age 40, Stephen Jay Gould, the famous American evolutionary biologist, was diagnosed with a rare form of abdominal cancer. Post-operation, he read about the cancer and found that it was incurable, with median life expectancy of only eight months. Though stunned initially, Gould soon smiled.

Median life expectancy of eight months simply meant that half the people diagnosed with that cancer lived for eight months or less, and half lived for more than eight months. Gould soon discovered that the life expectancy of patients was strongly right-skewed i.e. those on the plus side of the eight-month mark lived significantly longer than eight months. Gould himself went on to live for another 20 years!

Coming back to Nifty-50, between March 2015 and March 2017, the index clocked a CAGR of only 4%. However, within the Nifty-50 constituents, 19 stocks delivered return CAGR of 10% or higher. Likewise, Nifty Free Float Midcap 100 delivered two-year CAGR of 15%. Of the 100 constituent stocks, as many as 31 delivered return CAGR of 20% or higher. The frequency distribution of returns of Nifty-50 and Nifty Free Float Midcap 100 constituents confirm the concept of skew as shown below.

The return frequency distributions of Nifty 50 and Nifty Free Float Midcap 100 indices are right-skewed

Key takeaways
There are 2 key takeaways from the above –
1. Don’t be misled by indices:  Stock indices are merely the average of its constituents and can be misleading as regards investing opportunities in the market. As high as 30-40% of index constituents could significantly outperform the index itself.
2. Flat market is a stock-picker’s paradise:  If the benchmark indices remain flat (as was the case FY15-17), one may erroneously conclude that there are no money-making opportunities in the market. Quite to the contrary, flat market is a paradise for the diligent stock-picker with the right philosophy and process.


I welcome your feedback and suggestions for improvement. Please email the same to insights@motilaloswal.com.

Thanking you,

Raamdeo Agrawal
Chairman

Note: The source of all data used in this bulletin is MOAMC internal analysis, unless otherwise mentioned.

Disclaimer
This bulletin has been issued to explain our investment philosophy. The information contained in this document is for general purposes only and should not be construed as investment advice to any party. Readers shall be fully responsible / liable for any decision taken on the basis of this bulletin. Past performance may or may not be sustained in the future. This bulletin is not for circulation in general and is meant for intended recipient only. The bulletin does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.



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