Veteran emerging markets investor Mark Mobius has attributed India's recent sharp market correction to a combination of foreign institutional investor outflows and global uncertainty, while maintaining that the country's long-term investment fundamentals remain robust. The founder of Mobius Emerging Opportunities Fund emphasized that current volatility reflects global risk aversion rather than any fundamental breakdown in India's growth trajectory.

Foreign Outflows Drive Market Pressure

Mobius identified foreign institutional investor selling as the primary catalyst behind the recent market decline, with FIIs pulling out nearly $3.00 billion from Indian equities. The market correction has been influenced by multiple interconnected factors that have weighed heavily on investor sentiment.

The investor highlighted rising global trade and geopolitical uncertainty as additional pressures, combined with profit-taking following strong multi-year gains in Indian equities. A weaker rupee and higher crude oil prices have further contributed to the challenging market environment.

Technology Sector Expected to Lead Recovery

Despite current headwinds, Mobius expressed confidence that earnings momentum will ultimately attract foreign investors back to Indian markets. He specifically highlighted technology and software companies, including Infosys, as sectors where improving earnings could revive investor sentiment. While mid-cap and small-cap stocks have faced significant pressure, select consumer and technology stocks have demonstrated relative resilience during the correction.

Mobius noted concerns about India's recent underperformance relative to China, explaining that Chinese markets are recovering from severely depressed levels, which has contributed to their temporary outperformance over Indian equities.

Budget Expectations Focus on Investment Reforms

With the Union Budget approaching, Mobius anticipates reforms specifically designed to facilitate foreign investment flows into India. He emphasized the importance of simplifying investment processes for overseas investors and accelerating infrastructure spending as critical policy signals that could restore market confidence.

Key reform expectations include:

• Streamlined foreign investment procedures
• Enhanced infrastructure spending commitments
• Technology sector development initiatives
• Manufacturing sector support measures

Mobius drew parallels between India's current reform phase and China's historical development, noting that India's growth will increasingly depend on foreign capital, expertise, and technology transfer.

Sector Opportunities and Currency Outlook

The veteran investor identified several sectors positioned for strong growth when foreign flows resume. While acknowledging that financials will remain important due to their substantial index weighting, Mobius sees the most significant growth opportunities in technology-driven sectors.

Regarding currency concerns, Mobius dismissed rupee weakness as a significant worry for long-term equity investors, explaining that equities typically outperform currency depreciation over time as companies adjust pricing in real terms. He maintains a positive long-term outlook for India compared to China, citing structural advantages including a young population, strong consumption base, and services-led economic model.

Portfolio Allocation and Precious Metals Strategy

Mobius reiterated his recommendation for precious metals allocation in investment portfolios, suggesting approximately 10.00% allocation to gold and an additional 3.00% to 5.00% to silver. While acknowledging that Indians traditionally maintain higher gold exposure, he cautioned that gold does not generate income and should be balanced with quality equities for optimal long-term returns. The investor views the current gold rally as justified, driven by rapid US dollar money supply growth since the global financial crisis and pandemic-related monetary expansion.