Mark Mobius, founder of Mobius Capital Partners LLP believes India's banking sector is grossly overrated, while smaller companies from a number of sectors are underrated, market daily Moneycontrol reported.
One must note that banking sector stocks have the largest weight in India's headline indices. The Nifty Bank has grown at about 11 percent every year in the last five years, slightly lower than 11.5 percent compounded annual growth rate (CAGR) in Nifty, informed Moneycontrol.
“Probably the most overrated are the banks... and the most underrated are the medium-sized companies in a number of sectors,” the investment guru said answering about the most overrated and underrated sector in India.
The report also noted that Mobius holds four stocks, including Persistent Systems and Apollo Hospitals, in India and plans to hold them for a considerable period or “as long as they continue to grow”.
“The great opportunities are the non-index companies (those that are not part of key indices). That's where the great opportunities are,” Mobius said.
He further pointed out that the most incredible thing about Indian markets and what separates it from others is the number of companies that have a return on capital or return on assets of over 20 percent, he said.
Mobius is currently looking at technology, particularly hardware, informed Moneycontrol.
“We believe India has made incredible accomplishments in software, but going forward hardware is going to be very critical and very important in India. So semiconductors and businesses related to semiconductors will become more and more critical in India,” he added.
The report also mentioned that Mobius agrees with Chris Wood of Jefferies that the Sensex could grow to 1,00,000 in the next four to five years.
“If a country is growing at 7 percent, you can expect reasonably good companies to be growing at 14 percent – double the growth rate of the country. So, it's very possible that you can get this incredible growth in the size of the market and the actual investments in the market. No question (about that),” said Mobius.