Mobius says as long as S&P 500 continues to move up with corrections along the way, we will see a very good bull market in most countries around the world, particularly India.
After Vodafone, have you added any other stock to your India portfolio?
Mark Mobius: Yes, but I cannot tell you what it is because we are still adding. But yes, we have added. Because as I say, we are still sitting on more cash.Give us a hint. Midcap, smallcap, which sector it belongs to?
Mark Mobius: Right now, largecaps are more attractive. In the past, the midcap was more attractive to us but now, large-cap is where we want to be.
Why are foreign institutional investors not very convinced about investing in India? I mean, you are getting flows which are okay, not great.
Mark Mobius: The problem is it is quite complicated to make investments in India for investors. In America, the way for them to invest would be through index funds. But even the big institutional investors find it quite difficult. There are lots of bureaucracy involved in putting money into India. That I think a big problem and has to be looked at more carefully by the central government.
When you say complicated, what exactly are you referring to because the FDA and FPI route are very well open and there are a lot of funds via which I am sure everybody can invest. So, when you say it is complicated, what is that complication?
Mark Mobius: It is the tax issue. There are a lot of tax calculations that have to take place when foreigners are buying and selling in India. That I think is the big issue.ET Now: In the past, you have owned stocks like Reliance, and Vedanta as well as IT stocks. Are any of those contra trades looking interesting to you?
Mark Mobius: Yes, they are. The large-caps are looking interesting. But as I said, the emphasis for us now would be on raw materials. But sure, Reliance and these other big stocks look quite good, particularly as they are going to be benefiting from this incredible growth in India. So, generally speaking, those large caps with strong balance sheets will do fine.ET Now: You have owned a lot of niche IT companies in India like Persistent, CE systems. Is there any specific tilt towards niche IT companies in India?
Mark Mobius: I would say going forward, the interesting area will be in the hardware. Software in India is so well developed. There are global leaders in software like Infosys, TCS, and so forth. But going forward, the emphasis is going to be on developing computer hardware, chips, semiconductors – all kinds of hardware related to IT. I believe that at the end of the day, India will become very important in this area, just as China and Taiwan and other countries are important.
ET Now: But in general is it time to be cautious in equities, whether it is Indian equities or global equities? Do you think everywhere equity as an asset class is now richly priced?
Mark Mobius: I think it is important to remain invested in good equities globally. By the way that is the key, getting companies with strong balance sheets, good earnings growth, and high return on capital. These are the stocks that you want to hang on to and buy more of when the prices come down. So, you have to be involved in equities if you want to retain and grow your capital. But at the same time, given the very great deal of uncertainty, it is important to have some cash, some dry powder to put in when the market crashes.
ET Now: We have often seen that gold and Bitcoin are not parallel, they are opposites. Earlier this week, gold corrected, bond corrected, Bitcoin corrected, equity corrected, currency corrected. Normally we do not see this kind of synchronised selloff.
Mark Mobius: Yes, it is interesting to see what has happened to Bitcoin. Bitcoin has come down and probably will come down further. It is headed down much lower than we are seeing it now. But gold is holding up pretty well. It is a very interesting difference. By the way, strong gold is an indication of the uncertainty that we see globally and the kinds of uncertainty that people feel when they look at the markets.
ET Now: When it comes to global US tech and India, a specific emerging market destination, do you think the long-term bull market is still intact?
Mark Mobius: Yes, I believe the long-term bull market is intact and because the US is leading in this regard, you can see there has been a correction, but it is not a big correction in the context of what we have seen in the past. As long as S&P 500 continues to move up with corrections along the way – 5% – then you are going to see a very good bull market in most countries around the world, particularly India.
ET Now: Do you think this entire India story, where the bedrock is domestic institutional investors is the real deal and that irrespective of the market correction, the SIP flows and domestic inflows into Indian stocks will continue?
Mark Mobius: I believe flows into Indian stocks will continue and as foreign investors become more and more comfortable with going into India and making it and of course if the system is made easier for funds to come in, then you are going to see a continuation of this situation where more and more foreigners have holdings in India and where the Indian market continues to perform very well.
But you must remember at the end of the day, it is not foreign investors who drive the Indian market, it is domestic investors. It is interesting that the RBI recently said that they want the banks to attract more deposits and probably one of the reasons for this is that there are too many retail investors going into the market and gambling and it might be a good idea for them to keep some money in the banks rather than in stocks, but that is just a very short term kind of view.
