Fund Manager: Chirag Setalvad

    Investment Style: Mid Growth

    Investment Process: The fund manager invests in tangible businesses and continues to hold them over the long term.

He seeks quality companies from the mid-cap segment that he believes are reasonably priced.

 Rating: Gold

    Date of Analysis: May 2017

HDFC Mid-Cap Opportunities Fund is one of the best at what it does. Chirag Setalvad stands out as a capable manager who applies a hands-on approach towards research. The small/mid-cap segment can best describe the volatility across Indian equity markets. Other factors such as constrained liquidity and limited coverage can make small/mid-cap investing slightly more challenging. Hence, the need for a skilled manager and a solid investment process cannot be overstated.

HDFC Mid-Cap Opportunities makes the grade on all counts. In our opinion, Setalvad ranks amongst the best portfolio managers in the India. He has been managing this fund since its inception in June 2007, and we view his long tenure at the fund house as a positive. Detailed and exhaustive research is central to his investment approach. Setalvad emphasises gaining an in-depth understanding of a business before investing. He seeks companies with proven track records so he can gauge how they have held up during testing times. There is a perceptible quality bias in the investment style, characterised by investments in companies with strong management teams and robust business models.

HDFC Mid-Cap Opportunities inherent investment style is one that we have come to associate with the fund company's equity funds. Setalvad combines absolute and relative valuation parameters to select stocks that aren't too expensive relative to their growth prospects. The manager is a patient investor with a long-term investment horizon, which jells well with the quality bias. Given the bias for quality stocks, we expect the fund to underperform the competition in market phases when speculative fare is in favour.

Investors must also note that Setalvad's tendency to make contrarian investments can result in a divergent showing versus the category over shorter time periods. Nonetheless, over a market cycle, we believe the fund is equipped to serve investors well. Our confidence in the fund's performance potential has only grown stronger over time