Amid the ongoing correction in the small cap stocks in India, global investment guru Mark Mobius has listed three stocks that he is betting on.
In an interaction with CNBC, the investor revealed his three picks - Tips Industries, Netweb Technologies, and Waaree Renewables. All the three stocks are small cap stocks listed on BSE.
“I would say they are cheap. And by the way, when I say cheap, I don't look at price-to-earnings ratios or price-to-book or anything like that. I look at Return on Capital and growth. And that's why I think they are relatively cheap," the veteran investor said.
He also spoke about Tips Industries. “They are involved in creating music. If you have seen any Bollywood films, you would realise how big is song and dance. So, it’s an interesting company.”
The shares of Tips Industries have surged 231% in the past 12 months. On March 28 at 12:00 pm, the scrip was trading at Rs 469.4, recording a gain of 0.85%.
He also mentioned Waaree Renewables, which has risen by almost 400% in the past 12 months.
The firm manufactures renewable equipment and Mobius believes the solar power industry will be growing rapidly in the country. The stock was trading at Rs 1,358.45, up by 1.49% at 12:00 pm on March 28.
The third company that features in the investor’s recommendations is Netweb Technologies.
"I think it is very interesting because India is getting more involved in computer hardware and that's what they are involved in," he said.
The shares of Netweb Technologies have recorded a growth of 80% in the past 12 months. On March 28 at 12:00 pm, the scrip was trading at Rs 1,631.8, posting a slight fall of 0.07%.
Additionally, Mobius said investors should look for smaller companies if they are looking for long-term growth.
“You should not completely avoid large cap stocks. But, for long-term growth investors should target small cap stocks.”
The rapid movements in digitisation of the Indian economy and other technological advancements powered by a young population got Mobius bullish about the country’s prospects.
During the interaction, the investor said, “What the Prime Minister Narendra Modi has done is amazing. The country has digitised the economy and it is moving more towards technology. The Central Bank (Reserve Bank of India) has also taken big steps in terms of digital currency, moving even faster than developed countries.”
One of the reasons for this advancement, Mobius believes is because of the country’s focus on manufacturing. He said, “As we all know, India has been a leader in software. But, now they are taking a big step towards manufacturing as well.”
However, can India become the next China? Mobius believes the difference between the two neighbours is that India is a democracy. “They have a lot of different voices and I don’t think they will be able to decide on one policy for the world and go with it.”
One of the concerns in the West has been India’s stance on Russia. Recently, PM Modi congratulated Russian President Vladimir Putin after the latter’s election victory. Mobius didn’t believes it should not be a concern. “They have always been neutral. Their earlier policy used to be that of non-alignment."
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