Setting Equity Return Expectations, Demergers & Share Buybacks

In this fifth episode of our Prime Podcast, host Pavithra Jaivant engages in an insightful discussion with Vidya Bala, co-founder of PrimeInvestor, focusing on "How much returns to expect from your equity investments?" The episode commences with a roundup of significant financial news, from the Nifty's fleeting encounter with the 20,000 mark to intriguing buyback plans. Vidya sheds light on recent big demergers in the market, notably the one involving ITC's hotel business, and the emergence of Reliance's foray into the asset management sector through a collaboration with BlackRock.

The central theme revolves around investors' perennial dilemma of setting realistic return expectations for equity mutual funds. Vidya provides valuable insights into how investors typically arrive at such expectations and the pitfalls of relying solely on past performance, emphasizing the significance of equity risk premium and the necessity of being mindful of macroeconomic indicators such as GDP growth and inflation when setting return expectations.

With an illustrative example of Nifty's rolling 5-year returns, the podcast educates listeners on the importance of anchoring expectations around reasonable and achievable figures. Tune in to this episode to gain valuable insights that will empower you to make informed decisions and set accurate return expectations for your equity investments.

Relevant links -

What should be your return expectation?

Risk premium – What it is and how it helps you set return expectations

Country Default Spreads and Risk Premiums by Dr. Aswath Damodaran

RBI data on Equity Risk Premium

SIP to target calculator

Key segments in the podcast discussion:

1. Market Highlights: Nifty's Dance Around 20,000, Infosys Q1 FY 24, and Share Buybacks
2. Demergers in the Spotlight: JIO Financial and ITC's Hotel Business
3. Reliance's New Venture: Entry into the Asset Management Sector with BlackRock
4. The Fed Meeting and Its Impact on Indian 10-Year G-Sec
5. Setting Return Expectations for Equity Investments: The Challenge and Importance
6. Equity Risk Premium (ERP) and Its Role in Return Expectations
7. Macroeconomic Indicators: Influencing Factors for Return Expectations
8. Past Performance vs. Future Returns: The Pitfalls of Relying Solely on Historical Data
9. The Reality of Rolling 5-Year Returns: Understanding Average Performance

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