Mobius Sees India Outpacing Other Emerging Nations (Update1)

By Shiyin Chen
March 2 (Bloomberg) -- India’s shares may "outpace" other emerging markets as the country’s economy strengthens, investor Mark Mobius said in comments about the four biggest developing nations known as the BRICs.
"India’s macroeconomic fundamentals have significantly improved," Mobius, who manages $34 billion in developing-nation assets at Templeton Asset Management Ltd., said in a question and answer interview posted on the company’s Web site yesterday.
Templeton, a unit of San Mateo, California-based Franklin Resources Inc., has its largest holdings in Brazil, India and China, Mobius said. The BRIC nations including Russia will "do well in the long run" though they face volatility in the short term, he said.
The Bombay Stock Exchange Sensitive Index has lost 4.7 percent this year, after rallying 81 percent in 2009 as the economy dodged the worst of the global recession. The statistics agency on Feb. 26 forecast economic growth will quicken to 7.2 percent in the year ended March 31, from an expansion of 6 percent in the quarter ended Dec. 31.
Finance Minister Pranab Mukherjee said in his Feb. 26 budget speech that India had weathered the worst global economic crisis since the 1930s and that the South Asian nation’s growth may reach 10 percent in the "not-too-distant future."
"The government has done a good job in managing the economy through the recent crisis," said Mobius, the chairman of Templeton Asset Management. "Unlike companies in the U.S.
and Europe, most companies have healthy balance sheets and strong cash flows" in India.

Sensex Gains

The Sensex rose 1.5 percent to 16,676.2 as of 12:58 p.m. in Mumbai, after a report showed manufacturing output climbed the most in 1 1/2 years in February. Shares also advanced for a second day after the government pledged on Feb. 26 to trim the fiscal deficit from a 16-year high while boosting funds for roads, bridges and power plants.
Indian stocks may advance another 20 percent from current levels given the outlook for the economy, Sachin Shah, manager of the Alchemy India Long Term Fund, which has gained 90 percent in the past year, said in a Bloomberg Television interview yesterday.
"Valuations are at this point of time quite normal," Shah said. "I don’t think there’s much to fear from the domestic point of view."
Companies on the Sensex index are valued at 20.3 times estimated earnings, compared with an average of 17.4 times over the past four years, based on weekly data compiled by Bloomberg.

Best Performers

India’s stock market was among the 10 best performers globally in 2009, according to data compiled by Bloomberg. Still, it trailed a 121 percent gain in Russia’s Micex Index as well as an 83 percent rally in the Bovespa Index in Brazil. China’s Shanghai Composite Index gained 80 percent.
In Brazil, the growing consumer market creates "opportunities" for companies including financial services, health-care, cosmetics and beverage companies, Mobius said in the report. Russia’s "long-term outlook" is positive given its foreign-exchange holdings and natural reserves as well as the market’s valuations, he said.