9/20/2014 Expect Indian markets to be at much higher levels a year from now: Mark Mobius - The Economic Times

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By ET Now | 20 Sep, 2014, 04.19PM IST Post a Comment
"We have to be patient. We cannot expect overnight results,
but over the longer term, the results would be very good."
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Expect Indian markets to be at much higher levels a year
from now: Mark Mobius
ET Now caught up with Mark Mobius, Executive Chairman, Templeton EM Group, for his
take on the emerging markets as well some Indian stocks. Excerpts:
Nikunj Dalmia: Are you of the view that the current market rally is more like a
liquidity-fuelled rally and there is very little fundamental substance to it?
Mark Mobius: No, there is substance because we are getting growth, particularly in
emerging markets. The growth rates are very high. China is growing at 7 per cent, which is
extremely high for a country that is now the second largest economy in the world. So the
growth rates of these countries do justify more valuations, higher valuations. Of course there
are some exceptions where things are getting a little bit pricy, but we have to be cautious
generally regarding those companies and look for the bargains.
Nikunj Dalmia: Let us talk about the Indian markets. For the moment, the Indian
markets are clearly standing tall. An average domestic institutional investor is back,
there is hope and excitement. What is your view on India given the fact that India for
this year is one of the best performing markets in the region?
Mark Mobius: We are very positive about India and as you know, we have been positive for
quite some long time despite the fact that the previous government did not really move the
economy along as fast as we would have liked. But with the new government, we are
turning a new page. We have a blank sheet of paper and there is a lot to be written on that
paper, and I believe that Modi is the right person to do the job. Of course, we have to be
patient. We cannot expect overnight results, but over the longer term, the results would be
very good.
Nikunj Dalmia: There is an old maxim on the Wall Street that good news and good
prices really come together. Right now, news is good, but are the prices also good?
Mark Mobius: This is a problem and we are now finding it harder and harder to find good bargains among the large capitalised stocks in
India. However, amongst smaller cap stocks, there are opportunities and we are continuing to work on those as well as private equity
opportunities.
Nikunj Dalmia: So post 16th of May, have you increased your allocation to India?
Mark Mobius: Yes, we have. The increase has probably come as a result of higher prices in the stocks that we hold, but we have also
added to our stocks in India.
Nikunj Dalmia: From an India standpoint, what is happening is that the dollar index is going up and that has not translated into
some meaningful decline in equities. In fact, commodities are melting. What do you make of resource-dominated markets like
Brazil and Russia?
Mark Mobius: In some commodities, you are going to see flat movements of price. Iron ore would probably be one example where the
movement is not going to be very dramatic. Oil prices will probably range between 80 and 120 a barrel, but then, there are some
commodities like palladium which will continue to do well because of the demand for catalytic converters in gas powered automobiles and
that is particularly true in China. So it really depends on the commodity. Fast-growing emerging markets are going to lead more and more
commodities in every direction.
Nikunj Dalmia: The core of Templeton investment philosophy is value buying. So after a 40-50 per cent run up in Indian stock
prices, where is value still left in this market?
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9/20/2014 Expect Indian markets to be at much higher levels a year from now: Mark Mobius - The Economic Times
http://economictimes.indiatimes.com/opinion/interviews/expect-indian-markets-to-be-at-much-higher-levels-a-year-from-now-mark-mobius/articles 2/3
Mark Mobius: It is more and more difficult to find the bargains. So we are now looking at smaller and medium-sized companies to find
those opportunities. But it is very difficult. Most of the large companies have run up a little bit too high in price. It doesn't say that they are
going to come down and it doesn't say that they are going to continue going up, but it is getting more and more difficult for value investors.
9/20/2014 Expect Indian markets to be at much higher levels a year from now: Mark Mobius - The Economic Times
http://economictimes.indiatimes.com/opinion/interviews/expect-indian-markets-to-be-at-much-higher-levels-a-year-from-now-mark-mobius/articles 3/3
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Nikunj Dalmia: So as we speak, where are you allocating capital, where are you pulling money and where are you investing
more?
Mark Mobius: In some of the tech stocks, in pharmaceutical stocks, we have been taking some profits, but not substantially because we
still like a lot of these and we want to continue holding them. But I would say they are the main ones. We continue to hold the others.
Nikunj Dalmia: I distinctly remember that you were one of the earliest entrants in Aurobindo Pharma and you had a very large
exposure there. Are you happy to own Aurobindo Pharma? I mean that stock has just gone gangbusters of late?
Mark Mobius: Yes, we love those stocks, pharmaceutical stocks, which are moving up definitely.
Nikunj Dalmia: How exactly are you betting on the consumer theme?
Mark Mobius: We are looking at domestic stocks. We are looking at their parent companies as well. A good example would be Hindustan
Lever, which is standing at very-very lofty valuations, but their parent Unilever in London is standing at very reasonable valuations and as
you know, the parent is taking a bigger and bigger share of Hindustan Lever and other of the Lever subsidiaries in emerging countries. So
that is what we are doing. We are looking beyond domestic companies, we are looking at the parent for better bargains.
Nikunj Dalmia: Exactly a year ago, the Indian markets were in a tailspin. There was a feeling of a mortuary. Right now the
sentiment has taken a 180-degree turn. There is a carnival feeling out there. So a year from now, which is September 2015, what
kind of market do you think we could be staring at?
Mark Mobius: That is very difficult to say. A year from now things could change dramatically globally, not only in India. But if we take the
current situation, current trends, of course the Indian markets should be at much higher levels than where they are now.
Nikunj Dalmia: Mark Mobius is famous for his big call. So what is your big call for the emerging markets? Over the next four to
five years, do you think the emerging market as an asset class will continue to make money?
Mark Mobius: Yes, the big move would be in the frontier markets, particularly in Africa. I know Africa is becoming more popular, people
are turning to these countries, but it has just begun. We have got a long way to go there and there will be great opportunities for Indian
companies, for Chinese companies and others to go into Africa and make a lot of money.