Renowned emerging market investor Mark Mobius is betting on the benchmark Sensex to reach 100,000 in the next five years. That’s a 56 per cent upside from current levels.

Speaking at the Morningstar Investment Conference in Mumbai, Mobius listed diversity, creativity and young demographics as some of the strengths for India, which is the second-largest country in Mobius’ portfolio. “The young are using technology in a big way. The future is exciting,” said Mobius, who recently toured the state of Rajasthan.

While India may be trading at a premium to other emerging markets, it was important to focus on return on capital and the market’s earning growth potential over a longer timeframe, he said.

The growth of passive mutual funds has picked up pace in India over the last few years. Mobius feels that having a mix of passive and active products would be ideal for investors. “ETFs have become huge. It’s effectively going along with the crowd, and there’s nothing wrong with that. But if you had invested in an ETF mimicking S&P 500 some years ago vis a vis investing actively, the latter would have outperformed,” said Mobius.

Mobius said he loved the medium and small-cap stocks as they are not well researched, and the right picks could give outsized returns.

“I love when the market goes down because it gives you an opportunity to buy cheap. A good opportunity was during the Covid. You don’t just buy value, you buy good stocks, focussing on return on capital and companies that do not have much competition,” said Mobius.

Besides financial metrics, Mobius says he evaluates the management, board of directors as well as environmental, social, governance and cultural factors before picking a company. “We will not invest in companies which are not working on ESG and C. If they are not willing to work to improve on these factors, we will not invest. We stay away from companies that are too dependent on government contracts. Diversity of the Board, even for manufacturing companies, is another aspect that we assess,” said Mobius.

The speed at which markets are changing is phenomenal, he said. “So much information is available free of charge. The speed of trading has increased remarkably. The variety of markets available for investing has increase from six to 70 over the past few decades,” said Mobius.

According to him, investors need to pay attention to what’s happening politically.

“China is going through a sea change because of the new leadership. A lot of investors feel that the enterprise spirit has been dampened too much. We are focussing on assets that can easily move out of the country when faced with geopolitical risks.”

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