Mumbai: Mark Mobius, executive chairman of Templeton Emerging Markets Group at Franklin Templeton Investments, expects the Sensex to double over the next five years, on the back of economic growth, ongoing reforms and privatization.
In his preferred list of emerging market stocks, India ranks second, after China. In an interview in Mumbai, Mobius expressed concerns over the bitcoin frenzy, and said he hasn’t invested in the cryptocurrency. He welcomed India’s PSU bank recapitalisation plan, and said that has prompted him to include them in the funds’ portfolio. Edited excerpts:
Where do you see Sensex in the long term? What is going to be the theme of the market over the next one year?
I think it could double over the next five years, driven by economic growth, reforms and privatization. Economic growth and reforms will be the theme of the market for the next one year.
I am very bullish on the consumption theme in India. People now have extra money to spend.
Where do Indian equity markets currently stand in your preference order among emerging markets?
India now is second after China, in terms of weighting, but we are overweight India. If you look at the GDP of India, it is around 20% of China. However, in terms of our weighting in terms of relationship with GDP, our weighting is more in India. One of the problems you have here in India is, the selection of stocks is limited to those that are liquid. This is very important. If you have thousands of listings, but if they are not liquid, it is very difficult to buy.
China is at number one, because of the sheer size.
What do you make of government’s PSU bank recapitalisation programme? Are you looking at Indian state-run banks as an investment option?
Yes, definitely. In some cases, we have added state-owned banks. We are moving towards state-owned banks; as they have received recapitalisation, they are looking better. You have seen the way the market reacted positively too. This is going to be good, as this will improve the lending of these banks.
What are your thoughts on the mind-boggling surge in bitcoin prices? Are you bullish on it or bearish?
Bitcoins are giving tulips a bad name. It reminds me of the tulip mania in 1600s. One bulb was selling for a price of a house. It was a craze. People went nuts, and then there was a crash. You asked me I am bullish or bearish—I am both. In one way, there is a need for a way to transmit value over the internet anonymously, quickly and efficiently. Lot of people want to hide what they are doing and it does not have to be Al-Qaeda, North Korea or some smugglers. There are legitimate reasons why you want to hide. But then, when people attach a value to bitcoin, that is when you get into trouble, because there is nowhere you can go at the end of the day and say, ‘Look, give me the value. Give me what it is worth.’ If it gets to a point that a bitcoin can be freely exchanged for goods, it’s a different story, but until then, there’s a problem.It’s a musical chair. It’s great that music is playing and you can grab a chair. But, if there is no chair for you to sit down on, you are in a problem.
Have you invested in bitcoins?
Do you plan to invest in bitcoins?
No, but things can change. This can last a lot longer than you can imagine.
Demonetisation was not a successful exercise, as most of the notes were deposited into banks. GST implementation has also not been smooth. What do you make of the reforms process of the government?
I think their strategy is, we have been talking about reforms for 20 years, but it hasn’t worked as everyone was working out every single detail. So, they were like, let’s start and we will deal with problems on the way. The key is how they can correct these mistakes quickly. I prefer that approach too.
I think demonetisation was just a way to signal to the people that we are moving to the digital world, and everyone needs to get used to it.
What is your reforms wish list from the government?
Faster privatization, to move the infrastructure programme ahead.
A lot of insurance companies have been listed. Stocks of state-run insurers have been hammered post-listing. How do you see the sector in India?
Problem was the state-run insurers were priced too high. Unfortunately, when that happens, it puts off a lot of people away from IPOs (initial public offers). The insurance companies need to change, with digitization and online sales, they need to embrace a completely different paradigm, a new way of working.
Have you added insurance companies in your portfolio?
Yes, we have.
Which sectors do you like in India?
Banks—both private and state-owned, would be number one. Next would be conglomerates.
Which do you prefer more – large cap or mid cap space currently?
Now, it is mid and small cap. Of course, we have to look at large cap for some of our big funds, but I would say the opportunity is more into the mid-caps which are moving on to become large caps.
What is the biggest risk to Indian market currently?
The biggest risk I would say is the lack of progress over reforms.