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 Asset Allocation Passive Fund of Fund – Aggressive (G) - 10.079Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 10.0848Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 10.1205Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 10.1271Motilal Oswal Dynamic Fund (Div-A) - 13.0364Motilal Oswal Dynamic Fund (Div-Q) - 11.6756Motilal Oswal Dynamic Fund (G) - 14.3849Motilal Oswal Dynamic Fund-Dir (Div-A) - 13.169Motilal Oswal Dynamic Fund-Dir (Div-Q) - 11.8091Motilal Oswal Dynamic Fund-Dir (G) - 15.1536Motilal Oswal Equity Hybrid Fund - Direct (G) - 14.1436Motilal Oswal Equity Hybrid Fund - Regular (G) - 13.5643Motilal Oswal Flexi Cap Fund(D) - 23.0148Motilal Oswal Flexi Cap Fund(G) - 30.6172Motilal Oswal Flexi Cap Fund-Dir(D) - 22.9964Motilal Oswal Flexi Cap Fund-Dir(G) - 32.7082Motilal Oswal Focused 25 Fund - Direct (D) - 18.9481Motilal Oswal Focused 25 Fund - Direct (G) - 32.3673Motilal Oswal Focused 25 Fund (D) - 17.0761Motilal Oswal Focused 25 Fund (G) - 29.0949Motilal Oswal Large and Midcap Fund - Dir (D) - 13.275Motilal Oswal Large and Midcap Fund - Dir (G) - 13.275Motilal Oswal Large and Midcap Fund (D) - 12.9302Motilal Oswal Large and Midcap Fund (G) - 12.9301Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0133Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0499Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0231Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0083Motilal Oswal Liquid Fund - Direct (G) - 11.0535Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0127Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0488Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0223Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.0153Motilal Oswal Liquid Fund - Regular (G) - 11.0148Motilal Oswal Long Term Equity Fund (D) - 16.9352Motilal Oswal Long Term Equity Fund (G) - 21.558Motilal Oswal Long Term Equity Fund -Dir (D) - 20.1029Motilal Oswal Long Term Equity Fund -Dir (G) - 23.455Motilal Oswal Midcap 30 Fund (D) - 19.0281Motilal Oswal Midcap 30 Fund (G) - 31.1479Motilal Oswal Midcap 30 Fund-Dir (D) - 19.6084Motilal Oswal Midcap 30 Fund-Dir (G) - 34.0448Motilal Oswal Multi Asset Fund - Direct (G) - 10.5855Motilal Oswal Multi Asset Fund (G) - 10.4732Motilal Oswal Nasdaq 100 FOF - Direct (G) - 22.236Motilal Oswal Nasdaq 100 FOF - Regular (G) - 22.0246Motilal Oswal Nifty 50 Index Fund - Direct (G) - 11.8701Motilal Oswal Nifty 50 Index Fund (G) - 11.8072Motilal Oswal Nifty 500 Fund - Direct (G) - 13.6001Motilal Oswal Nifty 500 Fund (G) - 13.4578Motilal Oswal Nifty Bank Index Fund - Direct (G) - 11.3131Motilal Oswal Nifty Bank Index Fund (G) - 11.1954Motilal Oswal Nifty Midcap 150 Index Fund (G) - 15.4573Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 15.6207Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 11.9437Motilal Oswal Nifty Next 50 Index Fund (G) - 11.8418Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 15.1555Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 15.3163Motilal Oswal S&P 500 Index Fund - Direct (G) - 14.1853Motilal Oswal S&P 500 Index Fund (G) - 14.0886Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 9.8605Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 9.881Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 9.8675Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.0093Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 9.8714Motilal Oswal Ultra Short Term Fund - Dir (G) - 13.9715Motilal Oswal Ultra Short Term Fund (Div-D) - 9.8399Motilal Oswal Ultra Short Term Fund (Div-F) - 9.8504Motilal Oswal Ultra Short Term Fund (Div-M) - 9.8403Motilal Oswal Ultra Short Term Fund (Div-Q) - 9.9835Motilal Oswal Ultra Short Term Fund (Div-W) - 9.8433Motilal Oswal Ultra Short Term Fund (G) - 13.5527

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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