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Saturday, August 16, 2008

Power of compounding - Stocks Investment

How much can you make in 25+ years by just investing Rs.10,000 initially in any of financial instruments ?

Let us look at the real time 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 ? 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…
CIPLA
Investment of Rs. 10,000 in 1979 will fetch Rs. 95 cr.+
INFOSYS
Investment of Rs. 10,000 in 1992 will fetch Rs. 1.5 cr.+
RANBAXY
Investment of Rs. 1000 in 1980 will fetch Rs. 1.9 cr.+

If you think the above is not possible then read on…

A Chartered Accountant by profession Mr. Rakesh Jhunjhunwala is a name today on every Indians mind. He is often termed as Warren Buffet of India by many. His name catapulted into fame when Forbes, in 2007, ranked him as the 51st richest man in India. Son of an income tax officer late Shri. RadheShyam Jhunjhunwala, he started investing in stocks while in college. Rather than take a job, he started investing, with around an initial capital of Rs.5000 in 1985 when the BSE Sensex was at 150. His privately owned stock trading firm Rare Enterprises, the name derived from first two initials of his name and wife Rekha's name.

NAME OF COMPANY

SHARES HELD (as on 30/06/08)

APPROX

(as on 5/08/08)

VALUE (Rs.in crores)

TITAN INDUSTRIES

39,85,756

1277

508.98

PRAJ INDUSTRIES

1,33,76,624

188

251.48

LUPIN LTD

27,52,135

753

207.24

CRISIL

5,50,000

3631

199.70

NARAGJUNA CONSTRN

1,24,50,000

134

166.83

BILCARE

20,25,000

640

129.60

PUNJ LLOYD

50,40,000

291

146.66

PANTALOON RETAIL

23,30,895

353

82.28

KARUR VYSYA BANK

24,94,073

348

86.79

BHUSHAN STEEL

8,20,000

922

75.64

GEOJIT FINANCE

1,80,00,000

43

77.40

PROVOGUE INDIA

3,80,000

850

32.30

GARWARE WALL ROPE

5,00,000

86

4.30

PRIME FOCUS

8,82,500

460

40.59

VICEROY HOTELS

47,50,000

51

24.22

INFOMEDIA INDIA

15,06,062

155

23.34

AGROTECH FOODS

17,03,259

126

21.46

ZENOTECH LABS

11,50,000

113

12.99

MID-DAY MULTIMEDIA

22,50,000

26

5.85

ION EXCHANGE

5,00,000

153

7.65

ZEN TECHNOLOGY

5,00,000

164

8.20

ALPHAGEO

1,25,000

413

5.16

JB CHEMICALS

10,81,650

47

5.08

AUTOLINE INDUSTRIES

12,11,622

182

22.05

MRO TEK

5,70,834

51

2.91

HIND OIL EXPLOR

61,00,666

136

82.97

TOTAL VALUE OF PORTFOLIO – Rs. 2231.67 crore.

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