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Fund Manager’s Wisdom
The Economic Times Wealth, January 3, 2011

EXPERTSPEAK

Avoid ‘flavour of the day’ ideas
Funds managed by Chirag Setalvad
HDFC Balanced HDFC Capital Builder HDFC Children's Gift-Invt plan HDFC Children's Gift-Savings plan HDFC LT Advantage HDFC Mid-Cap Opportunities HDFC Multiple Yield Plan 2005 —Jointly managed

HDFC Midcap Opportunities Fund
Performance
30.42

18.68 13.27 9.19 7.49

17.06

7.52 -3.46 -0.90

6-month Fund Category Benchmark*

1-year

3-year

*BSE200. As on 27 Dec 2010.

Returns (%) greater than one year are annualised

Sector allocation

45.85%
Others

16.69%
Pharmaceuticals

15.95%
Banks

6.27%
Chemicals
NITIN SONAWANE

5.63%

6.13%
Electric equipment

CHIRAG SETALVAD
Age: 37 Qualification BBA (University of North Carolina) Current position Senior fund manager, HDFC Mutual Fund

My annual target for the fund
To beat the relevant benchmark by 6-7%.

My risk appetite is
Moderate. Risk lies in not understanding what you are doing. The important thing is to take calculated risks after considering alternative probabilities and outcomes. Capital protection is of paramount importance.

management, colleagues etc.

Abrasives & Grinding wheels

Small investors should
Focus on investing via SIPs.

Nearly 3% of corpus is in cash holdings/debt. As on 30 November 2010.

The Chirag Setalvad way of investing
I believe in a bottom-up approach based on fundamental analysis with an emphasis on business quality, understandability and margin of safety.

How frequently do you churn your portfolio?
My average portfolio churn is about 15%.

Top 5 stocks (% of net assets)
Ipca Laboratories 5.08 Exide Industries 4.09 4.07

What I do differently
I try to avoid 'flavour of the day’ ideas.

My best decision
Has been to always work with smart, like-minded people.
Lupin Carborundum Universal 3.74

My outlook for 2011
Markets are reasonably valued and returns are likely to track earnings growth with greater stock-specific moves.

My own money is invested in
Mutual funds—diversified equity 50-60% and fixed income 40%.

My worst decision
Not selling fast enough when an investment thesis goes wrong.
Crompton Greaves 3.47
As on 30 Nov 2010. Data source: NAV India

Five things my stock-picks must have
Sound management, attractive valuations, strong return on capital and good cash flows.

One bias I try to control
Confirmation bias—tendency to be more receptive to information that confirms your hypothesis.

Which books have influenced your investing process?
One Up On Wall Street by Peter Lynch, Why Smart People Make Big Money Mistakes by Gary Belksky and Thomas Gilovich and The Making Of An American Capitalist by Roger Lowenstein. (As told to Khyati Dharamsi)

HDFC Midcap Opportunities Fund, with an asset of `1,184 crores, is the largest of the seven funds managed by Chirag Setalvad.

11.6%
is the 3-year annualised returns of HDFC Balanced fund managed by Chirag Setalvad. Category average is 2.41%

What I like about my job I don’t touch stocks
That do not have straightforward management. Constant learning through reading, interacting with smart, accomplished people; company