Chetan has done his BE in Mechanical Engineering (gold medallist) along with his MBA from IIM Bangalore where he graduated as an institute scholar. He joined Templeton in 1995 where he now works as Director Research and is a portfolio manager with the emerging markets group. Before joining Templeton he had a 3-year stint at CRISIL where he was involved in rating corporate securities across various industries.
As equity markets breach the 5,000 mark for the third time in a matter of just a few weeks, we decided to take this opportunity to interview Chetan to assess his views on the markets and get a take on Templeton’s investment strategy.
Pfn: The Indian stock markets have run up dramatically in the last six months. The rise has probably been the sharpest in decades. How do you see the markets now in terms of valuations and investment opportunities? What is your view going forward?
Mr.Sehgal:
Our belief is that we are in what we consider to be a period of probably unprecedented opportunities. This is because of the low penetration in most industries, low wage rates in real terms, the opening up of the economy and the dynamism of the Indian Entrepreneur. Most of the pains of liberalization, which were experienced in the 1990s where Indian industry was uncompetitive and probably immature, are behind us. We have seen consolidation in several sectors, which leads to more competitive companies and greater producer discipline. Even more heartening is the fact that Indian companies are now looking globally.
Pfn: Please can you share with us your views on the economy and how you see it performing over the next couple of years.
Mr.Sehgal:
The economy is buoyant because of the demand being experienced by most sectors and the availability of competitive products. The consumers are getting a good deal. Also, India’s competitive edge in many industries such as software, pharmaceuticals, engineering have started to emerge. Note that many of these industries were spawned only after the 1991 wave of liberalization, when industries that existed based on import protection were replaced with more competitive industries. Thus the achievements in a little over a decade is quite remarkable.
Pfn: How would you define your investment strategy with respect to the funds you are managing?
Mr.Sehgal:
Most of our investment research is focused on the company. We try to invest based on our assessment of 5-year value of these companies. We take into account potential earnings growth, assets, corporate governance etc to arrive at our estimates of the company’s 5-year potential. We have an elaborate set of criteria including looking at comparisons with history, market, sector, and peer group in order to judge the potential of a company.
Pfn: What in your view is the rationale for investing in equity funds from the retail investor’s perspective?
Mr.Sehgal:
The rationale for investing in equity markets has never been clearer. Investors must look to maximize their returns over the long term and equity markets have traditionally been the best place to maximize wealth over the long term. If the corporate governance practices improve, then the interest of the entrepreneur and investor are aligned which leads to long-term wealth creation.
Pfn: What is your view on sectoral funds? Should they find place in a portfolio at all?
Mr.Sehgal:
Sectoral funds are for the more sophisticated investors who are quite sure about the sector themselves. Very often we see that many of the sector fund managers themselves are not committed to the sector and have tried to broaden the scope of investments within a few years of the launch of those funds. Another aspect is that because the sector funds have a narrow mandate, they should charge a lower management fee as they are only focusing on one sector.
Pfn: What are you favourite stocks/sectors? If you could also share with us the reasons why you are optimistic about these sectors/stocks.
Mr.Sehgal:
Being value investors the only Mantra we hold is that we like companies good companies at attractive valuations. One must remember that there are good companies but a great stock is different from a good company. Good companies are often difficult to beat and therefore when one is taking a bet on the not so good companies, the valuation perspectives and catalysts must be studied carefully.
Pfn: What is your advise to the retail investor?
Mr.Sehgal:
Don’t be bearish or cynical too often. It is not how much you made on the small bet, but how much you bet which would ultimately determine the majority of the returns. Thus allocation of money is important and one must do that based on ones profile and do take financial advise from experts.
Pfn: Where do you invest your own money?
Mr.Sehgal:
Most of it in Mutual Funds and RBI Bonds.
Pfn: Who are the 2 people who have had a significant impact on your life?
Mr.Sehgal:
My family who is always a source of inspiration, especially my 5-year daughter. My boss has been a source of learning and experience as there are very few people in the world who have had the opportunity to see so much for oneself all around the world and the kind of experiences he has had have great anecdotal value.
Pfn: What kind of books do you like to read?
Mr.Sehgal:
Currently I read magazines more than books, though as and when one gets a chance to stumble upon a highly recommended book, one does take that on. I like reading history, especially about other cultures.
