Veteran investor Mark Mobius has always bet big on emerging markets and in recent times has been exited about the opportunities in India. So much so that India is now the second largest in the portfolio of Mobius Capital Partners.
Speaking at the Morningstar Investment Conference in Mumbai, Mobius said the BSE Sensex had the potential to touch 100,000 in five years.
"We are very excited about India, Indian companies and Indian economy. The amazing thing about India is diversity. It is a big strength and the creativity is incredible here. Most importantly, you have a young population and it is using technology in a big way. That is going to be very important going forward," he said.
Indian markets trade at a premium to emerging markets. But Mobius is not worried about that. In fact he says any corrections will provide more investment opportunities.
"The Sensex is now about 60,000-70,000? I think it's gonna go to 100,000 within the next five years easily. When I say 100,000 in five years, it means there will be corrections along the way. I love when the market goes down. Because it given you an opportunity to buy cheaply," he pointed.
Mobius says he conserves cash waiting for such opportunities. But he wont buy just wildly, but look at good stocks. There are several parameters that he looks at before investing in a company.
"When I look at stocks, first thing I ask is, what's the return on capital? It's got to be at least over 20 per cent. Secondly, debt has to be low. Thirdly, it's got to have a earnings per share growth of at least 10 per cent. And of course, there's got to be liquidity," said Mobius.
He also stressed that they wont invest in companies following ESGC (environment, social, governance and culture)policies.
He sees India becoming a big gainer from businesses moving away from China.
Communist China saw rapid development under former premier Den Xiaoping, whose reforms led to the rapid growth of the private sector. This is now changing, pointed Mobius.
"We have a sea change politically today where Xi Jinping is saying, it's the politics that's more important, and the party must be the leader rather than the private sector. And that's a big change and the reason why a lot of people have been shying away from China. A lot of people are moving to India for that reason," he said.
Mobius loves picking up mid and small cap companies. One reason he says is that they are not part of the index and so not widely researched.
"We prefer to invest in companies where the general public has not known very much and we can have an edge by doing our research. If you are investing in the small and mid cap stocks, the growth potential is great," noted Mobius.
He says investors could opt for a mix of active and passive (ETF/index) approach when it comes to investing.