See more upmove than downmove in India: Mark Mobius

The Indian markets have witnessed volatility lately, thanks to geopolitical concerns in the subcontinent and concerns of stress facing the European banking system.But veteran emerging markets investor Mark Mobius thinks that the Indian government's reform drive would aid shares and drive investment into the country even as he thinks concerns over the fate of struggling Deutsche Bank would unnerve global markets.

In an interview with CNBC-TV18, Mobius, Executive Chairman, Templeton Emerging Markets Group, said any dip would be a buying opportunity for Indian shares and that he was a big buyer of the consumption theme, followed by telecom and Internet companies.

Replying to a question on valuations, he said they were a function of interest rates and given the falling rate environment, even a price-to-earnings ratio of 30 times -- which translates into a Sensex target of 45,000 given FY17 earnings-per-share of Rs 1,500 -- would be "tolerable".Indian shares are currently trading at 18.5 times, a little above historical mean of 16 times.Below is the verbatim transcript of Mark Mobius' interview to Latha Venkatesh and Anuj Singhal on CNBC-TV18. Latha: How serious is this border skirmish? Does it want you to draw back from buying India? A: There is no question that these problems will arise from time to time. Typically what you are seeing in Europe, with Deutsche Bank -- that affects the global market place because people get concerned about banks generally but I don’t think that is going to have a big impact on India going forward. Reform movement in India is ongoing and is very beneficial and we have complete confidence that India will move forward and the market would do very well. Anuj: The worry is that will liquidity suffer, will fund flows suffer because of the newsflow and will we go through a period of protracted uncertainty and correction, is that likely and would that be buying opportunity? A: I think it is a buying opportunity and going forward you are going to see a lot of more reform movements, implementation of the tax reform is very important and is just beginning. So I think the impact of these reform movements will have a very positive move on the market. Latha: How are you looking at the way in which the global market themselves have been receding from their near-term and all time highs? The US markets for instance an excuse which is not connected to them like Deutsche Bank, are all markets suffering from overvaluation, will we see protracted falls in global markets? A: There are two things happening. First of all, with these problems in Germany for example, Deutsche Bank with the slowdown of the US market, money is now moving into emerging markets basically India and China. So you can see more of that going forward which will tend to move prices up in these countries. In addition, the valuations of the Asian markets particularly India and China are much more attractive than those of the US and Europe. Then finally, if you look at what is happening on the ground in these countries, things are very good for these markets and will have positive impact on the markets. So I think we have to expect more up movements in India than down movements. Anuj: When you talk about valuations in India, are you looking at the relative valuation because on absolute valuations, Indian market is trading above median valuations and it has moved up a bit over the last six-nine months? A: You have to look at these valuations in relationship to interest rates.If you look at interest rates, how they are moving down, let us say interest rates are one percent, you can tolerate 100 times price earnings ratio. If interest rates are 5 percent, you can tolerate 20 percent. So looking forward, I believe with continued lower and lower interest rates, particularly in India, you will be able to tolerate much higher valuations.Latha: Like how much? At the moment, probably the Nifty is at current levels tolerating 17-18 times, how much more will you tolerate?A: I think you can go upto 30 times. There is no question about that particularly with the interest rate environment looking so benign. Interest rates in India should be going down as reforms kick in.Anuj: How are you looking at some of the big sectors? Financials have led the rally in India but the IT sector is going through a bit of a problem and the stocks are available at cheap valuations but the business itself is under a bit of a cloud. So going forward, how would you look at investments in financials and IT, the two big spaces in India?A: Financials are going to go through contraction, these financials may have some problems. That will result in consolidation and mergers and acquisitions sort of things which will be beneficial for the industry.As regards to the IT sector, the software people are going through some slowdown because of what is happening in the developed countries, growth rates in those countries is slowing down that impacts them. If you look further, in the internet sector, the survivors will do very well because internet is now growing at a very fast pace and is integrating into many different industries in India.Latha: Now that the markets have given you an opportunity to buy, what would you grab?A: Consumer -- that is where the story is and I believe going forward, with consolidation and a softening up of the situation in the telecom sector, I think that will be an interesting sector as well.