The Economic Times daily newspaper is available online now.

    I find stocks in select pockets outside the index attractive in India: Marc Faber

    Synopsis

    I still maintain India will outperform US in next 5 to 10 years, says Faber.

    ET Now
    In an exclusive interview with ET Now, Marc Faber, Publisher, The Gloom Boom & Doom Report, says considering how expensive US stocks are compared to companies in Europe and EMs, he would prefer to own international equities, European stocks and Asian stocks compared to say US stocks.

    Edited excerpts:

    Unlock Leadership Excellence with a Range of CXO Courses

    Offering CollegeCourseWebsite
    IIM LucknowIIML Chief Operations Officer ProgrammeVisit
    IIM KozhikodeIIMK Chief Product Officer ProgrammeVisit
    IIM LucknowIIML Chief Executive Officer ProgrammeVisit
    What is the call that you are making on India because you have been very bullish of late?

    As you know I have been relatively positive about India for the last 12 to 18 months. I have applauded the Reserve Bank of India for keeping interest rates relatively high and stabilising the currency. Since then the Indian market has significantly outperformed other markets. It is the second best performing market in Asia after South Korea which is surprising because South Korea has the potential of getting involved in a war but nevertheless it has been the best performing market in US dollar terms.

    In the Indian market, if you look at the composition of the index, the leading stocks are relatively expensive with frequently over 50 times earnings and so I am not that keen on the index anymore, but within the market. there are still some sectors that are relatively attractive and I still maintain what I have been saying for the last one and a half years that India would outperform the US over the next five to 10 years.

    You have said on record that you want to invest in India over the next 10 years versus investing in the United States. What would your bullish outlook mean for the market levels? Where exactly do you see the Sensex and the Nifty in the next 10 years because at the end of the day, the markets do reflect the underlying health of the Indian economy?

    I do not know where the market will be in 10 years’ time because that will depend a lot on monetary policies around the world and also on monetary policies in India. If you have a weakening rupee, the market will go up, will adjust more on the upside than if you have a strong rupee. But in general, the trend will be up whereby as I said we had a very big move this year and that in my opinion the market may still go up in kind of a bubble stage where some stocks go up very quickly and then will get a significant correction. But my view would be that investors around the world should own some Indian stocks and have some exposure to the Indian economy.

    Is the large part of the 10-year rally tied in with a high chance of political stability and policy consistency with regards to the Modi government being re-elected for a second terms or perhaps stretching it out to even a third one?

    Yes, I suppose that he will re-elected but it is not guaranteed. Nothing is guaranteed in this world but I would assume that he embarked on the reforms and he has been successful and the economy still has a vast potential considering the low level of economic development you have in the countryside. I am reasonably optimistic about India going forward.

    In the short term, you expect the markets to be risky with the Nifty now at a five-digit index and valuations at 21-22 times. How much more upside do you see for the markets before we actually see a material correction kicking in?

    I explained to you that we may move now into kind of a bubble stage where some stocks go up very strongly and that we then have a meaningful correction, this is what I explained to you.

    If you are calling for a correction in world equities, what will lead to that correction in world markets and what kind of selloff in percentage terms are you expecting? Would it be the kind of shocking, crisis sort of step back as we saw in 2008?

    Well the globe is divided between essentially super bears and super bulls. I belong to the super bears but I have equity exposure because you have to think it through and you are very negative about the world and you do not want to hold everything in cash. Basically since 2009, we have not reduced but increased the debt level and we have in addition created a rise in inequality. The inequality benefits the very wealthy people but the wealthy people as a percent do not spend a lot of money and so the economy in this environment of increased wealth inequality is not performing particularly well.

    The markets have gone up substantially, we have an asset bubble driven by credit and obviously, the markets have become quite vulnerable. Having said that, if I look at the markets around the world what is striking is how expensive US stocks are compared to European companies and especially compared to companies in emerging economies. I would prefer to own international equities, European stocks and Asian stocks compared to say US stocks.



    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more


    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
    The Economic Times

    Stories you might be interested in