India`s markets will benefit from robust savings pool: Mobius
June, 06th 2008
Indian markets will benefit from the robust savings pool and will remain partially insulated from a US slowdown due to the country's lower export contingency on US, says Mark Mobius, the 71-year-old investment guru and executive chairman of Franklin Templeton Investments.
While China's export and investment-led growth will lead to overcapacity in many sectors, India will remain shielded in being a domestic consumption-led story.
"India is also expected to record sustained economic growth in the future. The country is a good example of where entrepreneurship has taken hold of the economy, and where the private sector is thriving despite bureaucratic red tape and poor infrastructure", says Mobius.
On his outlook on emerging markets, he says that stronger domestic currencies, higher investor confidence and high commodity prices have led to good performance of markets in the Latin American region.
Stock prices in China and India corrected after positive returns last month, while the Pakistani market suffered due to worsening economic indicators and political uncertainty.
Mobius also believes that the quality of higher-level education in India is comparable with top international universities and is much better than that in China.
This has enabled the country to produce highly-intelligent workers in fields such as business management, science and information technology. It has made India one of the most revered locations for outsourcing by developed markets.
The author of "Passport to Profits", Mobius also outlines the challenges facing India's economic growth. "Core problems facing India include the lack of infrastructure development and high fiscal deficit, which have been hindering the country's development. To ensure that India's growth is further augmented, the government needs to focus on reducing the high fiscal deficit", he says.
On his best bets among sectors in India and China, he says consumerism remains a major investment theme with higher incomes resulting in greater demand for products and services.
"We maintain a positive view on energy, materials, consumer and infrastructure sectors in these markets. Energy stocks should continue to benefit from greater revenues and earnings as a result of high oil prices and greater global energy demand", says Mobius.
China and India continue to invest heavily in infrastructure development, which should benefit companies in this sector, he says.