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`Valuations are expensive relative to other countries'

On the Sensex hitting a new high this morning, Mr Mark Mobius of Templeton said had not expected a new high for the Indian market so soon.

Mr Mobius further said with the average India P/E at 16x, one needs to be cautious.

He also added that from a global perspective the best returns in the last three months have come from Turkey, Brazil and Russia.

Excerpts from CNBC-TV18's exclusive interview with Mr Mark Mobius

We are at all-time highs in India, you wouldn't have expected that so soon, would you?

Well no, and congratulations. It's a wonderful event that the Sensex is reaching news highs because that's good news not only for India but also for all emerging markets.

You have been a bit sceptical about India and its valuations, does it surprise you that so much money continues to come into this country and we continue to outperform other relatively seemingly cheaper emerging markets?

No, it is not a surprise when one sees it with a view of the very rapid growth that India is now experiencing. Also, it is not surprising because of the momentum that's been building up in the market, meaning that it is quite possible for the Index to move up to very high levels.

But at the same time, the valuations are expensive relative to other countries around the world. So caution is necessary in such cases.

We have just stepped into earnings and they have been quite strong, do you think many fund managers will have to do a rethink in terms of re-allocation to this market, purely because of the sort of returns its delivering?

Yes, if the multiples come down as result of higher earnings, then yes. Certainly, there must be a re-assessment but right now the average price to earning ratio for India is about 16 times.

So, we have to be careful because that is pretty high compared to places like Japan, which is at 17 times and the US, which is at 14-14.5.

So we have to be cautious now and there is no question the high growth rate in India is a very positive factor and could result in revision of earnings but it remains to be seen.

You track a lot of these emerging markets very carefully, across your GEM funds or even your BRIC funds, which market has really delivered the best returns in the past three months?

The best returns have been achieved by Turkey, Brazil and it depends on what stocks you have, but Russia's been very good as well.

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