India Emerges for Mobius Followers Picking Global Stock Bottom

Mark Mobius is leading a return of fund managers to India as the nation’s biggest banks say demand for cars and homes will help them ride out a global recession. “Domestic industries can build high profits and growth,” Mark Mobius, 72, who manages more than $24 billion in emerging- market assets as executive chairman at San Mateo, California- based Templeton Asset Management Ltd., said in a Nov. 22 interview. He is buying Indian consumer-related stocks. Bulls on India were clobbered this year as the rupee fell 22 percent to a record and the Sensex stock index slumped 57 percent. Executives at Mumbai-based State Bank of India, the nation’s biggest lender, and Housing Development Finance Corp., the largest mortgage firm, said investors ignore the potential for interest-rate cuts and rural spending to fuel demand. Finance Minister Palaniappan Chidambaram predicted last week economic growth will “bounce back” to 9 percent next year, from at least 7 percent this year, driven by record crop plantings, public sector pay increases and tax breaks. The International Monetary Fund in Washington said this month that India may expand 6.3 percent in 2009, the fastest after China among the world’s 20 biggest economies. Sustained expansion in the world’s second-most populous nation would help lift 456 million people out of poverty and underpin the shrinking economies of Japan, Europe and the U.S. Scope to Cut Domestic consumption accounts for more than 55 percent of India’s economy, compared with 37 percent of gross domestic product in China. Chidambaram, 63, said in a Nov. 18 interview that the central bank has scope to cut borrowing costs as inflation slows to a level “we can live with.” India is adding 100 kilometers (62 miles a day) of new roads under a $27 billion construction program, bringing urban markets within reach of 60 million farmers in the past five years. Even Detroit-based General Motors Corp., seeking a U.S. government bailout, is hiring 500 workers as Indian car sales, which fell the most in three years last month, “should improve,” said P. Balendran, a vice president at the local unit. “My rural business is growing faster than my urban business,” State Bank Chairman Om Prakash Bhatt, 57, said in a Nov. 18 interview. “The psychology and the expectation of the people have changed. They are looking for a better life, they are actually enjoying a better life.” Lehman Fallout State Bank plans to hire 25,000 staff and open 2,000 branches in year ahead, Bhatt said. Housing Development Finance, or HDFC, predicts lending will increase more than 20 percent, Managing Director Keki Mistry said in a Nov. 19 interview. Templeton, Aberdeen Asset Management Ltd. and F&C Management Ltd. are buying Indian stocks as strategists predict a rebound in the rupee, after it fell 8.3 percent to 50.025 a dollar since Sept. 15. That’s when the bankruptcy of New York-based Lehman Brothers Holdings Inc. caused credit markets to freeze, prompting investors to hoard cash and pare investments in everything but the safest government securities. The median forecast of 17 strategists in a Bloomberg survey is for the currency to strengthen to 48.3 by the end of June. “We are positive on India,” said Devan Kaloo, who overseas $30 billion as head of global emerging markets in London at Aberdeen, Scotland’s biggest independent money manager. “The key drivers for growth are domestic, with the prospect of rates coming down sharply into 2009.” ‘Infrastructure Problem’ Kaloo and Mobius are buying after many global funds gave up on the market. Overseas investors turned net sellers of Indian equities this year, dumping a record $13.4 billion, according to data provided by the Securities and Exchange Board of India. They bought a record $17.4 billion in 2007. “I am not a huge believer in the Indian story,” said London-based Steen Jakobsen, who manages $150 million as chief investment officer at Saxo Bank A.S., a Danish Internet trading bank. “It has a huge infrastructure problem.” Steel Authority of India Ltd. of New Delhi, the nation’s second-biggest producer, said this month it may lower output as construction companies delay projects. Bangalore-based Infosys Technologies Ltd., India’s second-biggest software services provider, cut its profit forecast in October. Mumbai-based ICICI Bank Ltd., India’s second-largest bank, suffered a run on deposits last month as its funding costs surged. India’s interbank overnight lending rate soared to a 19- month high of 19.5 percent on Oct. 31 even as the central bank cut its benchmark rate by 1.5 percentage points in two weeks to 7.5 percent. The benchmark has since dropped to 6.55 percent as the central bank pumped cash into the financial system.