Indian investors have been facing some tough times over the past month, with the benchmark BSE Sensex correcting nearly 7% during the period. Most would not risk getting into the market now. However, investment guru Mark Mobius believes that is a big mistake because “bear markets do not last very long”.
Following the crowd and not taking advantage of the bottoms in the market, according to Mobius, is a huge folly. Speaking at the Morningstar Investment Conference in Mumbai on Tuesday, he said that “a lot of people are concerned about the bear markets" and "they say in this bear market, I’m not going to risk it... big mistake because bear markets are very short in duration”. If one takes a look at all the bear markets in emerging economies since 1990, it appears that the average length of a bear market was 7 months and the average decline 34%, he added.
The founding partner of Mobius Capital Partners said, “If you can get in when things are really bad, when people are afraid to invest, then the upside can be huge... don’t be afraid to go in when things look bad, when everyone else is selling.”
His conviction in the message was evident in his response to a query about a piece of advice he would give to himself at the start of his career. “Not to follow the crowd,” he said without missing a beat.
Mobius is not oblivious to the hurdles in the way of the much-awaited uptick for the Indian stock markets. Rising crude oil prices, a depreciating rupee, tariff wars between the U.S. and China, a widening current account deficit, the concern over missing the fiscal deficit target are taking toll on investor sentiments.
Despite these challenges, Mobius believes there are ways for India to make the most of the situation. Although he believes the rupee could weaken further against the dollar, he sees this as an opportunity for India. “To me this looks like an incredible opportunity for India. When the rupee becomes weaker, exports become competitive,” he said, adding that the government must look at streamlining regulations to make it easier for companies to export products and also import parts for products.
On trade war, Mobius says India is poised to benefit. “It’s time the government takes advantage of the trade war. We’re already seeing a lot of manufacturing moving to Southeast Asia and a lot of this can come to India, provided the government can streamline the approval processes,” he said, adding that he doesn’t see the trade war situation easing anytime soon.
Mobius, however, feels that pressure from the rising crude oil prices will continue and relief is not close yet. “We see oil going to a $100 per barrel. That is a problem for India because it’s a net importer,” he said.
Commenting on what the government can do to ease the liquidity crunch in the markets and contagion fears after the IL&FS debacle, he said the government must make it easier for investors to come in to India. “I think there’s a lot to be done in terms of making it easier for money to come in to the country, particularly now… One way to do that is to have a one-stop shop where investors can go and all the paperwork can be done at once,” he suggested.
Mobius has two key factors which he says investors must keep a close eye on: One is the handling of what he calls ESG (environmental, social and governance) issues and the other is the value system of the people behind a company.
“There is huge scope for work to be done on the ESG front in India. Sectors like mining, manufacturing, and infrastructure must start looking at ways to reduce environmental damage and treat workers better, he said. Historically, companies which performed better on the ESG fronts outperformed their peers on growth as well, he added.