Mark Mobius bets on India, says correction is over now

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The worst seems to be behind us as Indian markets have outperformed its global peers, posting an almost 11% gains in January alone. In an interview to CNBC-TV18, Mark Mobius, executive chairman of Templeton EMs Group said that the correction is behind is now.

"It really was a correction in an ongoing bull market of last year. It was caused by the fact that we had too many IPOs in 2010," he explained, adding that "there are net inflows into overall funds and that's a sign that the investor is back. "

With a positive outlook, he is expecting reforms in telecom sector will aid consolidation. However, Mobius is a bit concerned that very strong rupee may not be beneficial for economy.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: What have you made of this January rally? Do you think we have slipped from the bear market of 2011 into early stages of bull market?

A: Yes, I do. I actually don't think it was a bear market, but a correction in an ongoing bull market of last year. It was caused by the fact that we had too many IPOs in 2010. As you know, it was about USD 540 billion of new emerging markets IPOs. We saw half that last year and now of course we are seeing more money coming back in. We are seeing net inflows into overall funds and that's a sign that the investor is back.

Q: Where is this money coming in from? Is it European investors who are putting money into emerging market funds like yours or is it coming in through ETFs?

A: I would estimate about 70% is coming from outside the US. As you know, in the past the US investors were first but now it's the international investors; I am not just talking about Europeans, but Asians, Latin Americans. I just came back from Latin America and they are putting more and more into international funds because their own pension funds are running out of space in their domestic markets. So we are seeing a real surge in global investing all over the globe.

Q: Do you expect this powerful rally of January to continue or do you expect corrections and maybe the pace of the rise to moderate once liquidity slows down?

A: With liquidity infusion slowing, there would be profit taking along the way and so you will see corrections as we go forward. But the trend will definitely be up as more and more people recognize that they have to be diversified away from Europe, away from the US and that there are tremendous opportunities in emerging markets because of the very low debt to GDP levels, high foreign reserves and very rapid growth.

Q: What about liquidity itself? It is said that the next round of LTRO would actually unleash even more liquidity which might find its way into emerging markets. Do you see that possibility over the next few weeks?

A: Yes. As you know, in the past I have always said that QE3 is around the corner. Whether they call it QE3 or not, it will happen and that is now taking place.

Read on to find out Mobius' view on the rupee..