Understanding Market Capitalization and Benchmark Indices

School of Intrinsic Compounding

INCREASING
INTERNET
PENETRATION

2014 2015 2016 2017 2018 2019 2024E
600
400
200
0
DOMESTIC
MARKET
SIZE FOR
PIPES INDUSTRY
GROWTH OF PIPES INDUSTRY
180
205
225
250
270
300
550
(IN RS.BILLION)

GROWTH IN THE PAINTS SECTOR

GROWTH IN THE FOOD INDUSTRY

WHAT IS MARKET CAP ?
Market capitalization refers to the market value of a company's
outstanding shares of stock. Commonly referred to as "market cap,"
it is calculated by multiplying the total number of a company's
outstanding shares by the current market price of one share.

NIFTY:
Top 50 Stocks
SENSEX:
Top 30 Stocks
(Ranked based on
Market Cap)
(Ranked based on
Market Cap)

S C H O O L O F I N T R I N S I C C O M P O U N D I N G
DUTCH EAST INDIA COMPANY
EST.1602
INVESTORS
FIRST JOINT STOCK COMPANY IN THE WORLD
HOW CONCEPT OF EXCHANGE
CAME INTO EXISTENCE ?

DIFFERENT BENCHMARKS
100 250

WHO ARE DIIs ?
DOMESTIC INSTITUTIONAL INVESTORS INSURANCE COMPANIES ASSET MANAGMENT
COMPANIES

WHO ARE RETAIL INVESTORS ?
RETAIL INVESTORS
A retail investor is an individual or non-
professional investor who buys and
sells securities through brokerage
firms or savings accounts like 401(k)S.

PROFIT AFTER TAX
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 TTM
4,000
3,000
2,000
1,000
0
843
989
1,114
1,395
1,939
2,156
3,489
1,219
1,745
2,039
2,705
3,139
(In Crores)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 TTM
2,500
2,000
1,500
1,000
500
0
PROFIT AFTER TAX
429
533
602
852
1,060
1,353
2,049
773
1,126
877
1,984
1,377
(In Crores)

NIFTY COMPOSITION

Before NSE came in, it was essentially Broker raj.
BSE went on strikes over and over again. Couldn't ever
reform completely as it was controlled by Brokers
All 20 exchanges were regional in nature and NSE came
in as a national exchange.
BSE even held the government to ransom through
strikes and shutdown threats
BSE Board was full of brokers which led to Mis-
incentives
Need for another exchange post the Harshad Mehta
Scam, trading began on NSE in 1994.
Better Rate of order conversion: 90% vs 30% earlier
Smoother weekly settlement mechanism vs fortnightly
for BSE
Higher trust: eg-Pre Verification of securities.
FLAWS IN BSE

SENSEX HAS
AN UPWARD
BIAS BECAUSE
WE HUMANS
CONSUME
MORE

INDIAN
CHEMICAL
INDUSTRY

2006 2007 2008 2009 2010 2011 2013 2014 2015 2016 2017 2018 2019 2020 2021
150
100
50
0
24
31
41
47
72
59
50
77
88
98
108
117
126
136 150
IT
INDUSTRY
NASSCOM IT EXPORTS

The Investors
hold stocks for
Shorter Time
Periods

WHAT DOES A COLLEGE
STUDENT USE IN HIS/HER LIFE?
TINDER
(MATCH.COM)

WHAT DOES A COLLEGE
STUDENT USE IN HIS/HER
LIFE?

WHAT DOES A COLLEGE
STUDENT USE IN HIS/HER LIFE?

SOIC BOOK RECOMMENDATIONS

"Compound Interest is the
Eighth Wonder of the World"
-Albert Einstein

DAY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Rs 0.01 DOUBLED EACH DAY Rs 10,000 ADDED EACH DAY
Rs 0.01
Rs 0.02
Rs 0.04
Rs 0.08
Rs 0.16
Rs 0.32
Rs 0.64
Rs 1.28
Rs 2.56
Rs 5.12
Rs 10.24
Rs 20.48
Rs 40.96
Rs 81.92
Rs 163.84
Rs 327.68
Rs 655.36
Rs 1,310.72
Rs 2,621.44
Rs 5,242.88
Rs 10,485.76
Rs 20,971.52
Rs 41,943.04
Rs 83,886.08
Rs 1,67,772.16
Rs 3,35,544.32
Rs 6,71,088.64
Rs 13,42,177.28
Rs 26,84,354.56
Rs 53,68,709.12
Rs 10,000
Rs 20,000
Rs 30,000
Rs 40,000
Rs 50,000
Rs 60,000
Rs 70,000
Rs 80,000
Rs 90,000
Rs 1,00,000
Rs 1,10,000
Rs 1,20,000
Rs 1,30,000
Rs 1,40,000
Rs 1,50,000
Rs 1,60,000
Rs 1,70,000
Rs 1,80,000
Rs 1,90,000
Rs 2,00,000
Rs 2,10,000
Rs 2,20,000
Rs 2,30,000
Rs 2,40,000
Rs 2,50,000
Rs 2,60,000
Rs 2,70,000
Rs 2,80,000
Rs 2,90,000
Rs 3,00,000
POWER OF
COMPOUNDING

1% BETTER EVERYDAY

POWER OF
COMPOUNDING
The Mona Lisa is an oil painting by Italian artist, inventor, and
writer Leonardo da Vinci.
In addition to being one of the most famous works of art, it is also
the most valuable
Francis I of France paid $10,000 in 1540 for Leonardo da Vinci’s
Mona Lisa.
If Francis would have a held his ground and found an alternative
to make an investment at 6% then the wealth generated would be
worth $1,000,000,000,000,000.00. That's $1 quadrillion or over
3,000 times the present national debt, all from 6%.
M O N A L I S A

INITIAL PERCENTAGE LOST PERCENTAGE GAIN NEEDED TO BREAK EVEN
LAW OF LARGER LOSSES
(PORTFOLIO BREAK-
EVEN)

Simple Interest vs Compound interest

What is Warren
Buffett's return in his
Investing Career ?
"Investing is often described as the process of
laying out money now in the expectation of
receiving more money in the future"
-Warren Buffet

Berkshire Hathaway vs S&P 500
20%
Warren Buffett's
Investing return

"If you don't find a way
to make money while
you sleep. You will work
until you die"
-Warren Buffett

“Be neither the Boss nor
Employee, but the Owner. To
own the trains, and have
someone else ensure they run
on time.”
-Tim Ferris

Why all of us have different outcomes when
it comes to money?

The Story of Mike Tyson
Made over $700 million (4,900
crores) in career earnings.

We were not taught
Financial Literacy in
school. The most
important thing to
realize is that when
money is in good hands,
it wants to stay and
keep multiplying in
those hands.
-Robert Kiyosaki

How can we Multiply the Most Scarce Resource:
"TIME"

Residential
Real Estate:
Fixed Deposit:
Stock
Market:
12-14%
Returns of Different Asset Classes over a period of time
5%
2%
Commercial
Real
Estate:
7%
Delhi (NCR)
Delhi (NCR)

What will 1 Lakh turn into in these
Different Asset Classes?
Residential
Real Estate:
Fixed Deposit:
Stock
Market:
12-14%
Commercial
Real
Estate:
5%
2%
7%
Delhi (NCR)

Indian Investor: Raamdeo Agrawal

Indian Investor:
Rakesh Jhunjhunwala
From ₹ 7,000 to
₹ 17,500 crore
in 32 years

Indian Investor:
Radhakrishan Damani
From ₹ 50 Lakhs to
₹ 140,000 crore

"If you are buying a Stock
then you are buying a
piece of Business"
-Benjamin Graham
(Father of Value Investing)

Returns: 39,000% +
in 20 years
Returns: 1,72,000% +
in 20 years

Returns: 12,000% +
in 20 years
Returns: 22,000% +
in 20 years

Returns: 6,000% +
in 20 years
Returns: 6,000% +
in 20 years

Returns: 29,000% +
in 20 years
Returns: 14,000% +
in 20 years
Lets see if Benjamin Graham's right:

Source: Oaklane Capital CREDITS: Oaklane Capital

CREDITS: Oaklane Capital

Source: Oaklane Capital
CREDITS: Oaklane Capital

Sensex
Returns:
6,500% +
15% CAGR

"I'm selfish, impatient and little insecure. I make
mistakes, i am out of control and, at times, hard
to handle. But if you can't handle me at my worst,
then you sure as hell don't handle me at my best"
- Mr. Market

"The mood swings of securities markets
resemble the movement of a pendulum.
Although, the midpoint of its arc best
describes the location of the pendulum "on
average", it actually spends very little of its
time there. Instead, it is almost always
swinging towards or away from the extremes
of its arc. But whenever the pendulum is near
the other extreme, it is inevitable that it will
move back towards the midpoint sooner or
later. In fact, it is the movement toward the
extreme itself that supplies the energy for
the swing back."
-Howard Marks

Understanding Market Capitalization and Benchmark Indices

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