Positive on India – believe it to surpass China in its pace of growth
Mark Mobius, Former Executive Chairman, Templeton Emerging Markets Group
Feb 23, 2018 | Source: CNBC-TV18
Mr. Mark Mobius indicated that some more correction is possible after having seen an 8% correction in the market so far. He mentioned that that not only in India but the US market and many other markets around the world particularly the developed markets in Europe and the US have reached high points. On a historical basis, there is a reason to believe that you are going to have corrections from these very high levels that we are seeing now.
Talking about higher inflation and higher yields in 2018, he said that, ‘higher inflation is actually good for equities if interest rated don’t catch up.’ This means there is negative real rates which is good for equities which need to be watched out carefully. There is no question – interest rates are going up. The Fed is definitely going to want to raise interest rates particularly if the unemployment situation improves in America, so you have that aspect. On the other side, of course, weaker dollar changes the picture as well. That may attract money coming into the US but more likely money will be quite cautious in the face of a weaker dollar, which will be good for other markets including emerging markets.
Regards the Indian Banking system which has gone through a terribly rough patch for several quarters now due to large NPAs and PNB USD 2billion fraud, Mr. Mobius shared that such a situation is not present just in India or China but is prevalent globally too despite all the regulatory efforts. He says that the Indian Government will step into saving the troubled bank and is himself not worried about it. Infact he says that this will have a more structural impact in a sense that all other banks will be more ultra-careful to look at their systems because definitely there have been faulty systems that something like this can happen.
Over the next 12-18 months, he’s positive on India despite the upcoming state elections as he believes the reforms the current government has taken has had a positive impact on the society as a whole. Thus hes very positive on India and thinks its at a take-off stage and will probably surpass China in terms of growth going ahead.
Attractive sectors according to him are Banks – especially those who are working towards improving their digital offerings. Apart from Banks he also is positive on medium sized companies who are entering into new services like consumer, industrial services in every direction. For an example he mentioned about companies working on new technology on 2Ws ie EVs.
On Insurance companies he believes, those companies that are able to utilize the digital world are going to be in a much better shape and the advantages are tremendous. The thing that is hitting these insurance companies now in terms of more efficiency and those survivors will be the ones that are able to utilize the digital world and in offering services and also in gathering clients.