Mahesh: You have stayed with your approach all these years. Have you ever felt you should change, especially in the last 18 months of roller coaster?
Prashant Jain, executive director and chief investment officer, HDFC Asset Management Co. Ltd. Abhijit Bhatlekar / Mint
Jain: The approach that I have followed is basically to buy good businesses at reasonable or cheap prices and hold them for medium to long periods of time. I see no reason to change this approach, as it works well particularly over long periods. This approach does not do well for limited periods only in extremely bullish markets but that pain has to be endured.
Vijay Kumar: Is there any possibility of the Sensex again touching 21,000?
Jain: Over time, yes index should reach those levels. In medium to long periods, returns should be in line with earnings growth, i.e., nearly 15% per annum.
Vijay Kumar: Fund managers are supposed to take care of our funds. Then why is it that with Sensex going down MFs have also gone down?
Jain: Fund managers are not experts at timing the markets in my opinion, there main role is to manage the funds in line with the investment objectives and to do better than the markets which several funds have done; equities always carry uncertainty in the short run, but the risk reduces over long periods. That is why one should invest only long-term resources in equities.
Also See HDFC Equity Gr (Graphic)
KEA: There were times years back when you used to hold concentrated portfolios of 20-25 stocks. Now, you are more diversified. Has your style changed over time or is it because of a large corpus?
Jain: In the present market condition, most sectors are close to fairly valued. It makes sense to focus the fund only when there are few and large opportunities.
Abhishek: If you say 15% per annum over the long term, how many years do you mean?
Jain: Abhishek, the true definition of long term is: The longer the term, the better it is and more are the chances of equities delivering target returns. Time reduces uncertainty but not entirely. The good news is that eventually the markets tend to compensate for the entire holding period.
Siddharth: Do fund managers in HDFC invest a portion of their wealth in the funds managed by them?
Jain: I cannot comment for others, but in my case it is true.
Brenda: On one hand it is said that timing the market is difficult, but don’t you think fund managers try to do that?
Jain: We have consistently maintained that timing in the short run is not our strength. We, however, comment on the market based on prevailing valuations and growth outlook with a long-term view; our main value addition comes from delivering returns better than markets, which so far our funds have done.
KEA: Why are the markets declining? Is it just the euro or China is also affecting?
Jain: Markets in the short run are volatile and unpredictable. At the same time, the problems in Europe and tightening in China have adversely affected commodities in particular. However, over long periods fall in commodities is positive for India as low oil prices save us lots of money.