Even without huge Modi verdict, India’s a winner for FIIs: Mark Mobius
We are focussing on the medium sized companies, says Mobius Capital partner.
It has been a resounding verdict and I am not going to focus too much on the intraday move. How FIIs will look at this? Will this mean a fresh inflow into India given that one of the biggest event risks is now clearly out of the way?
I believe it is very positive. It is quite a big surprise as heard people saying there will be a coalition, etc, etc. So the outlook was not that great. But even without the resounding victory that you had, the general feeling was positive among foreign investors because among the whole spectrum of emerging markets around the world, India is really the winner, the Indian markets performed much better than others and, of course, with China down and with the trade war, India is looking very, very good.
In terms of policy action, while we have got continuity now, there is going to be keen interest about what the new government comes out with in order to boost growth of the economy and of course markets. What will you be watching out for?
Labour reform should be at the top of the list because you have got a tremendous workforce which wants to work. There are about 100 million migrant workers in India moving from one place to another, looking for jobs. They have to do something about the labour reform so that companies can hire more than 100 people and they are not bureaucracy. That is number one because you want to get workers working and getting their standard of living moving up.
Of course, it is already doing well. The economy is doing very well but this would give a tremendous boost. The other thing is to really move along the infrastructure projects because with better infrastructure, better roads, better railroads, it is going to be a big winner for India and the Indian population, particularly people in the farms.
If they can get their products through the market faster, if they communicate better with the cities, then you are going to be in a much better shape. I would think those two areas infrastructure and labour reform would be as the top of my list I would say.
Would your clients buy India suddenly after the narrative or is that not going to happen because Indian markets otherwise irrespective of the election verdict are rich and does not make sense to buy into right now?
I think the buy India idea is very viable. It is a huge market you have got. But that was holding it back. The two points that I just made – labour reform and infrastructure because if you are manufacturing something in the south, you want to get to the north, it might be easier to just import it rather than moving it to the very poor roads or railroads. So that is number one on the list and that would be very important for the buy India push.
Until now, while we are cheering an all-time high on the markets, but that has been a very restrictive move – just 8-10 stocks leading the benchmark indexes up. The small and midcap portfolios are still bleeding. Would this decisive mandate politically ensure broader market recovery or would you still say that the preference would be towards the largecaps?
When you get a move like this in the index, you have all the ETFs and index funds filing in and hence they emphasised the largest stocks. But I think that will be temporary. You are going to get a move down into the medium and smaller stocks as the market moves forward because there are so many good opportunities there. We are focussing on the medium sized companies.
For long you and many others have been liking financials largely also because of its large representation on the index. What else would you be looking to buy -- infrastructure, consumption or cyclical?
We would be interested in companies that supply infrastructure projects -- be it people making steel bars, pipes and tubes, cement and anything related to supplying the infrastructure push would be of interest to us.
On the consumer side, we have to be very careful about the impact of internet selling. As you know internet sales are moving up in India and so any company you look at, has got to have some kind of internet strategy or at least some answer to internet competition. This is where you are going to have to be focussed.