Mobius’ portfolio currently has 25% exposure to India, and he expects this allocation to increase in the future
The long-term growth trend In India remains intact and the country stands to reap dividends from the shift in investors’ perception towards China, according to Mark Mobius.
Many global investors, particularly those from the U.S., have experienced setbacks and are now exercising caution in further investments in China, the co-founder of Mobius Capital Partners said.
Consequently, they are looking towards India as the next promising destination. India stands out as the only other country with a population exceeding a billion and a young demographic profile, he said.
The price to earnings ratio is often used when evaluating valuations. But, a challenge arises in China as earnings growth is not as significant as in India, where the PE ratio may appear expensive due to the swifter increase in price as compared with earnings, according to Mobius.
“But if you consider the growth rate of earnings, India could be considered cheaper,” he said. “So, that’s the reason why we usually don’t look at price-earnings to value a company or market, we look at return on capital and, of course, we look at EPS growth.”
The key focus is on determining the return a particular stock or market provides for the invested capital and, in this aspect, India is performing well, Mobius said.
India is perceived to have benefited from the current situation in China. However, this does not imply that China will remain subdued indefinitely, he said. Recovery will take time and in the interim, India stands to gain from the redirection of investment flows from China, according to Mobius.
His portfolio currently has 25% exposure to India, and he expects this allocation to increase in the future.
Mobius said India would probably receive the largest single country allocation due to several factors—the presence of strong values, evident growth opportunities and the substantial size of the Indian market, which is large and expanding.
He identified two reasons for the changing real economy of India. Firstly, technology and digitisation are being actively promoted by the government, which is considered crucial for growth, not only of India but also for other countries globally.
Secondly, the presence of a young population is emphasised, highlighting their ability to quickly adopt and adjust to the new technology, according to him.
Where To Invest
Mobius emphasised that the critical factor—whether in transportation, infrastructure or banking—is undeniably technology. The key consideration lies in evaluating the extent to which companies leverage technology to enhance profitability and growth prospects.
“We love technology, but it doesn’t mean we’re going to buy only software companies or hardware companies in the tech sector, but we will buy companies that use this technology to improve growth prospects and profitability,” he said.
Mobius said the suppliers to electric vehicle companies—including those providing batteries, battery components and electronics—represent crucial elements in the EV industry. “The electronics in electric vehicles would be an interesting area,” he said.
(With Agency Inputs)
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