Templeton Asset Management Executive Chairman Mark Mobius says a recent visit to India has reinforced his belief that the country can keep up its growth rate, but he warns that overheated markets in India could lead to a “Dubai-like” situation or correction.
“I confess that many [Indian stocks] currently do appear to be rather expensive,” Mobius writes on his blog. “With [the high] demand from Indian domestic investors, Indian stock prices have rebounded from their lows. Given the large amount of liquidity in the market, we believe a Dubai-like situation or other corrections in the market might surface in some areas further down the road if over-spending and over-leveraging go unchecked.”
Still, Mobius says that he is still finding opportunities in India, and says his firm is making “some strategic investments in Indian companies”. He says the firms he spoke with during his recent visit to India “indicated that their businesses are growing above expectations, and that downturn in the U.S. and in Europe didn’t affect them as much as they had expected.”
Mobius says he focuses on bottom-up, company-by-company research, and lists the key factors in his investment decision-making. “When we visit companies and talk to management, we probe into the balance sheet, the profit and loss statement, and most importantly of all, the future of the company,” he writes. “What are their plans for the future? What do they want to do in terms of their products, in terms of their overall business environment? And during those discussions, we also talk about other potential concerns we may have. For instance, their exposure to derivatives.”