"We look at management in a much deeper sense"

In our chat with Sanjay Chawla, Chief Investment Officer (Equity) at Baroda BNP Paribas Asset Management India, he spills the beans on assessing a company's management quality, the asset allocation model behind their balanced advantage fund, and much more. Here is the edited transcript. You started as a management consultant in 1990. How did the switch to asset management happen? The actual journey began when I was in class 10th. During that time, I realised that I needed to understand the stock markets, perhaps purely out of curiosity. This led me to approach a couple of bank managers, as they were the hottest people back in the early 80s and guided me all about the stock market. But, since my entire family was a bunch of engineers and I did well in class 12th, I did engineering. But my ultimate aim was to get into the stock market. So, I did my MBA. Unfortunately, at that time, the role of a stock market analyst was not well-defined. I needed a bridge to get into that business. Hence, I got into management consultancy to look at the demand-supply and get the feasibility of the companies, etc. This gave me an excellent grounding to get into the equity markets. What kind of stock is untouchable for you? There are certain principles that we go by. We may not really like certain sectors based on return parameters. There needs to be business predictability, management accountability, and valuation. These are the three things that we would look at. Let me give you an example. In 2010, the sugar industry was doing extremely well based on all the parameters. The domestic prices were rising, and globally, there was a shortage, but the inflation in India was so high that the government came and clamped them down heavily. So, you had a beautiful industry, which, if left alone, would have done extremely well. But you saw a selling interaction; the area in which you could sell and the sugar cane price were also being determined by the government. So, these are the red fla