Focus now on GST implementation: Mark Mobius
Franklin Templeton's Mark Mobius on Indian and emerging market equities, Urjit Patel as new RBI governor and impact of Brexit
Mumbai: Mark Mobius, executive chairman at Templeton Emerging Markets Group, Franklin Templeton Investments, said that with the passage of the much-awaited goods and services tax (GST) bill in Parliament, the focus has now shifted on its implementation.
In a phone interview from Tokyo, Mobius said India and China are among his top emerging market bets, adding that he did not think Indian equities are expensive. Edited excerpts:
The much-awaited GST bill is passed in India. Which other reforms do you expect to come in now that GST is behind us?
At the end of the day, the legislation is passed, but it would be very important to see how it is implemented. I would say that is very, very critical. Each of the states has to approve it.
Are Indian equities looking expensive at this point?
No, I don’t think so. In relation to the level of interest rates, I don’t think stocks look that expensive. Interest rates globally are coming down and when they come down, it becomes more feasible to have higher valuations.
Where do Indian equities stand amid your ranks for emerging markets and why? How do you rate Indian stocks at this point?
In global funds, India is now after China. In our small-cap funds, the Indian market is big and ranks pretty high.
Earlier this year, Brexit (Britain’s vote to exit the European Union) was an unexpected event that the world markets witnessed. Apart from the knee-jerk sharp decline, markets seem to be back to normal. What is the likely impact from Brexit or is it just a non-event?
I think, Brexit was not really a global event. Also, the process of (UK) actually separating from the EU is not in place yet, and of course, UK Parliament is yet to pass the approval of the article to separate from the EU. So, this will take time. Of course, there will be an impact in the UK.
Urjit Patel has been named the next Reserve Bank of India (RBI) governor. What are the key positives you see from this appointment and what are your concerns stemming from it?
Raghuram Rajan was quite independent. Also, the new gentleman (Patel) will be able to do a good job, due to the fact that he has worked as a deputy governor when Rajan was the governor. He may not be outspoken, but I think he will do a good job.
Which are your favourite sectoral bets in India and why?
I’m looking at a five-year time frame. I would say software services. Over the long-term, they should do very well. I am not too concerned about the short-term picture.
Another area we are looking at is the consumer sector.
What other steps would you like the government to take towards state-run banks to make them more efficient?
I think one of the important things is to accelerate the identification system. They can do a pretty good job in getting the ID cards, and for the people who open bank accounts, a direct transfer can be made. I would say they will have to accelerate that program to make sure that all Indians are covered.
There could also be somewhat lower rates for small and medium-sized business. Right now, the interest rates for these businesses is really high. If these rates come down, it would be very good for the economy.
What is your take on the NBFC (non-banking financial companies) space?
You have to be careful, because for some of these microfinance companies, NPLs (non-performing loans) can be quite substantial, and that is an area that needs a careful study.
At the same time, if the rates are too high, then their NPLs are going to pile up.
Indian pharma stocks have taken a hit, partly due to warnings of the US Food and Drug Administration (USFDA), and these stocks are down for the first time in many years. Do they catch your attention at these levels, or is there more pain in the offing?
I think they are a good catch. With FDA giving them warnings, I think some of these companies are doing their best to improve their systems and making sure they don’t have this problem again. So, in that sense, there are a number of pharma companies in India that could give good return going forward.
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