I like commodities and expect it to continue with the run? said Mark Mobius, executive chairman of Templeton Emerging Markets Group, who manages about $26 billion of emerging market portfolio, in a press meet in Mumbai. He expects demand surging for these commodities to keep the prices higher. His list ? oil, iron ore, copper, platinum, palladium, coal and nickel. His emerging market portfolio is also skewed towards materials, while remaining overweight on banks, diversified financials and auto.
?I prefer commodity companies like Sesa Goa, which benefits from higher demand for steel.? Tata Chemicals, Hindalco and Sesa Goa are among the top holding stocks of his emerging markets portfolio. While not having a specific price target, he also expects gold prices to trade up further on the back of rising demand.
? I continue to remain bullish on Bric markets? said Mobius. While he believes higher inflation would affect economies globally, he said it wouldn?t upset the applecart in India if wages and salaries also continues to rise ? as the latter could keep the consumers wealthy. He however said he does not have any direct holdings in Indian infrastructure firms because of the opacity of firms.
What makes emerging markets attractive to him is the higher GDP growth rates for emerging economies against the developed world.
?At 11 times forward earnings, valuations are neither too-high nor too low,? he said.
At this juncture, he is advising investors as well as his clients to remain invested in equities. As far as Indian equity markets go, he foresees three possible risks ? unemployment, food inflation and water (scarcity), the last being a long-term challenge that the country might have to face on higher demand for agricultural products. While higher oil prices remains a worry, he feels the government could also help cushion the price rise for Indian consumers. He also feels small and midcap stocks hold a nice opportunity for cherry-picking. Expressing surprise over the typical behaviour of global investors turning back home on any concerns, he said it could be a big investment mistake as it could make one lose out on opportunities.
While dismissing corruption as something unique to Indian market, he said corruption is rife across the world. ?It is not a big issue (as in India) as long as it doesn?t affect the business processes?. He said on a global scale he is finicky about the treatment meted out to minority shareholders which has its bearings on his investments.