1. How legendary EM investor Mark Mobius beats high India market valuations and what worries him

How legendary EM investor Mark Mobius beats high India market valuations and what worries him

Veteran emerging markets investor Mark Mobius is taking advantage of the breadth of Indian equities markets to selectively buy scrips that may still be undervalued, even as the key indices turn expensive following the recent rally.

By: | Published: April 10, 2017 11:19 AM
Mark Mobius Mark Mobius, Executive Chairman of the Franklin Templeton Emerging Markets Group, says that while the big caps are expensive, but small caps are interesting in India. (Image: Reuters)

Veteran emerging markets investor Mark Mobius is taking advantage of the breadth of Indian equities markets to selectively buy scrips that may still be undervalued, even as the key indices turn expensive following the recent rallies, he said in a television interview recently.

“We have been putting in money into small cap stocks that have better valuations,” Mark Mobius, Executive Chairman of the Franklin Templeton Emerging Markets Group, which has about $2.5 billion worth assets under management, told Bloomberg TV.

Small caps

The 80-year-old veteran, who has been investing in the emerging markets for over four decades now, said that the he is finding small-cap stocks in India interesting as of now, in the face of surge in the valuations of the large cap companies shares. “The big caps are expensive, but small caps are interesting,” Mobius said.

The large number of listed companies available for trade on Indian bourses allows investors to find lots of good bets, he said. “The beauty of the Indian market is that it’s huge – the number of companies is huge, so we have a lot of choices,” Mobius said. There are about 5,500 stocks listed and available for trade on the Bombay Stock Exchange – Asia’s oldest bourse.

Liquidity

However, Mobius said that in some areas less availability of liquid funds is a cause for concern. “Of course, liquidity is a problem in some areas, but this is the opportunity I think for India,” Mobius said, adding, “On a very selective basis we can still find opportunities.”

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Earlier November, Prime Minister Narendra Modi, in a surprise move, demonetised, Rs 1000 and Rs 500 currency notes, effectively withdrawing 86% of the currency in circulation in the country, leaving people and businesses scrambling of cash to run their day-to-day operations. However, the Reserve Bank of India introduced new currency notes and has since replaced most of the Rs 14.5 lakh crore worth of the currency withdrawn.

GST

Further, Mobius said that the impending introduction of GST (Goods and Services Tax) will benefit a lot of companies, making them more attractive investment bets. “The impact of this tax (GST) – having one tax for all the states – is going to have a big-big impact on all the companies, particularly the small ones,” Mobius said.

“What you are going to see is an acceleration in earnings per share, so the predicted price-earnings ratio will come down pretty dramatically in many of these companies,” he said.

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