Now with the Yes Bank problem, there may be opportunities in the financial sector, said Mark Mobius of Mobius Capital Partners.
Global markets have been volatile in trade lately as rising number of coronavirus cases have kept a lid on gains. Moreover, the price war between Saudi Arabia and Russia after the Organization of the Petroleum Exporting Countries (OPEC) Plus meet widened the fall.
So, the big question now is how investors should position themselves now, where the buying opportunity is and how long the rout will continue. Mark Mobius of Mobius Capital Partners said, “I don’t think we are at the last stage of panic yet simply because when you have interruption of supply chain as you are having now then the results of this supply chain shortage comes months later when the earnings report come in, sales report come in etc."
"The big problem in the case of the coronavirus is that it started in China and had the biggest impact in China. Around 70 percent of pharmaceutical ingredients for India comes from China, 25 percent of car parts come from there etc., therefore there is going to be a hit to earnings and profits of Indian companies and of course some of that is already in the market but not all of it. So we have to expect more earnings downgrades going forward,” he said in an interview with CNBC-TV18..
Speaking about the crash in the oil markets, he added, “I would say there is no way that we will see the same (2008) kind of financial crisis because that one was very specific to the US over the housing problem and we don’t see that. There have been some cases with Yes Bank where some banks get into trouble because they have funding issues but I don’t think it is the same. I do think it is very important to remember that we are in a situation where the global fear is what is driving a lot of prices down."
"I read someone saying lower oil prices are very bad for countries but it is good for India, it is good for a number of countries. So in some ways Saudi Arabia and Russia have stepped in and helped the rescue package for countries like India, in the sense that it is going to be less onerous for India to import fuel and that will be good for the economy.”
With regards to US markets, he said, “You will see a 3-4 percent more on the downside. A lot of the selling has pretty much been completed now, people are beginning to think of buying in again which is why you are going to see day to day some spike-up in the market but the real recovery will not come for a number of months in my view.”
On the spread of coronavirus he said, “There has been issues regarding supply of coronavirus testing kits. The big difference is that in China, the government can ask everyone stay at home and everyone stays at home but in democracies like US and India, it is impossible to do that because they are a democracy, a free country so it is very difficult to restrict people and their movements and their behaviour. You can encourage them to stay home and you can take certain measures but it is very difficult. So I would say that unless there is intense isolation of those people found to have the virus in the US and India and so forth then you can see the spread as great as it was in China,” he further mentioned.
When asked about the opportunities in Indian market, he said, “Now with the Yes Bank problem, there may be opportunities in the financial sector. We are particularly interested in consumer space and now with oil prices lower, that will get a boost in India. Also companies that are dependent on infrastructure supply because I believe Prime Minister Narendra Modi and his party will try their very best to boost infrastructure spending at a rapid pace.”