Mumbai: Global markets have risen over the past two months and, since 9 March, most have seen an unbroken rally. Many markets are up 50%, India is up 70-75%.
Mark Mobius, executive chairman of Templeton Asset Management Ltd, who invests in several markets across the world, was one of the first to predict that global equities were readying themselves for a big rally.
Buying opportunity:Templeton Asset’s Mark Mobius says the markets may correct by a modest 15-20%. JC Franca / Bloomberg
In an interview, he spoke on where he sees the markets going from here, his reading of the Indian political verdict and how he intends to approach the Indian markets. Edited excerpts:
Is it time for a pause or you think we can still run on from here?
Well, the fact that the markets are up so much...—emerging markets in general are up 70% and, as you know, India is up more than that. I think it’s a good time to take a break and maybe have a correction, but there’s still a lot of money waiting in the wing. So...better not get too much in cash if you are fully invested at this stage.
Generally, in the past, after such big rallies, markets sometimes give back one-third of the gains, sometimes even half of the gains. Are you expecting a fall as big as that or a more modest one?
I would say it would be more modest—15-20%; something like that, of course, depending on the sector and the country..., but I think that’s a doable correction. But, as I mentioned, there’s still a lot of money waiting to (be) invested, a lot of people missed this rally and want to get it but are afraid to get in at this stage. So you’ll probably see a lot of takers if the markets come back this much. So, I would say the correction would be a little more modest.
What would be the trigger for such a correction?
It will probably be an external event. Something about interest rates, something about government policies in various parts of the world. Maybe something happening in North Korea; it could be a political event. But any trigger like that would enable the market to correct back, so I think that it could be almost anything and, of course, there would be people on the sidelines waiting for that event to come back in.
In case you get that 15-20% dip over the next few weeks or days, would you be looking to buy that dip? Would you look on that as a buying opportunity for the remainder of cash that you may be sitting on?
Well, the best thing would be to see if there are any opportunities, any bargains lying around. As I mentioned, we are up 70% from the absolute bottom and P-E (price to earnings) ratios, price-book value ratios have come up but it is still relatively cheap looking at the historical perspective. So, any correction would, of course, be an opportunity to look for cheap stocks.
What about the flip side to that in terms of an upside? Do you think there is potential for more in terms of an upside?