Sensex is on its way to touching the 1 lakh mark in the next five years, believes global investment guru Mark Mobius of Mobius Capital Partners, who is a big advocate of the Indian equity market in the emerging markets space.
"Given US 10-year Treasury is giving a risk-free return of 5 percent, the case for equities has become a bit weak. That said, the long-term growth story for India remains intact. In fact, if there was a little bit more correction, we would have deployed some more cash into India," Mobius told Moneycontrol on the sidelines of Morningstar Investment Conference.
In the past two weeks, Nifty and Sensex have corrected almost 3.5 percent in the wake of rising tensions in Israel, higher bond yields and volatile crude prices.
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"Now we have three global events to watch out for. Ukraine, South China Sea and Israel. And, I believe markets will take it all in their stride. What is really important, however, is the interest rate. It will take a while for the US to hit Fed's 2 percent inflation target. Till then, interest rates will stay at these levels for a longer time," Mobius said.
In September, the Federal Reserve held interest rates steady in a range of 5.25-5.50 percent, the highest in 22 years. In its upcoming rate decision on Wednesday, the central bank is expected to hold rates steady again.
Stocks and sectors to bet on
Compared to other emerging markets, India might look expensive in terms of price-to-earnings ratio, admitted Mobius. "However, a lot of people are only focused on the 'P' and not on the 'E' of P/E ratio. A good company in India easily has the potential to grow at 12-13 percent every year, which is double India's GDP growth rate," he said.
According to Mobius, investors can find such companies in sectors like software, construction materials and healthcare. For instance, he is betting big on stocks like Persistent Systems, APL Apollo Tubes, Dreamfolks Services and MapMyIndia.
"These companies have low debt, high return on capital ratios and good growth ahead of them," Mobius said, reiterating that he does not like to look at well-researched, well-known companies that are part of the index.
Also Read: Exclusive | In every sector, we prefer companies that are not in the index yet: Mark Mobius
Two years back in a different televised interaction, Mobius had named APL Apollo, Persistent Systems, Polycab and Metropolis as his top picks.
Currently, Mobius is particularly enthused by MapmyIndia, which provides mapping and utility services. "Seeing MapmyIndia soar confirms our belief in their vision. The company is doing a terrific job in mapping and location technology," he wrote on Linkedin on October 18. The stock has doubled investors' wealth in 2023 so far.
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