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Mark Mobius sees signs of dotcom bubble in tech rally

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NEW DELHI: Emerging markets investment guru Mark Mobius is seeing signs similar to the dotcom bubble of the late 1990s in the ongoing US technology stocks rally, which has inflated the worth of many of the companies.

“The rally in concept stocks like Tesla is similar to the dotcom crisis. The runup in the scrip has been based on pure speculations, and valuation is off the roof now. The recent stock split in some tech stocks is adding more to the volatility,” Mobius said in an interview with ETNow.

Tesla that makes electric cars has surged eight times from March lows on speculations that the company may be included into S&P500, which may bring in huge ETF fund flows to the stocks. In the same period, Apple has nearly tripled. Both stocks went through stock splits to make them more accessible to retail investors.

Thanks to the demand for technology names, Nasdaq has nearly doubled from its March lows. The rally has made Apple the first $2 trillion company and Tesla’s founder Elon Musk the third richest person on earth.

Mobius said his exposure to India is the largest in his portfolio, thanks to the mark-to-market gains after the sharp rally in the Indian market. In May, India stood at the third position in his portfolio, behind China and Brazil.

“I continue to hold three Indian stocks in the portfolio and they have run up well. Investment in India is focused on infrastructure and medical sectors. Being a little overweight on emerging markets at this time makes sense,” he said.

BSE Sensex has risen 51 per cent from March lows. NSE flagship Nifty has also surged by a similar measure. Nifty Midcap index has added 58 per cent in the same period, and Nifty Smallcap index 78 per cent.

The founder of Mobius Capital Partners said he had expected the avalanche of money printed by central banks to come into markets. He said the flow will continue to drive markets higher and one should remain bullish on gold and equities.

Mobius said one must be fully invested in quality stocks and it is probably not a good idea to stay away given the ample liquidity in the market. He said he is always looking for new opportunities and bargains, but will not rush in.

“One should buy stocks with good earnings, fundamentals, dividends and governance. My focus is on value but also considering trends while picking stocks. I am positive on technology linked pharma stocks,” said the veteran investor.

The pharma sector has been the biggest beneficiaries of the pandemic as the need for medical and drugs have soared. Nifty Pharma is the biggest index gainer, up over 85 per cent since March.

Mobius said the demand for semiconductor is also rising, which makes electronics a major trend but he is bearish on banking stocks in all parts of the world.

“It is very difficult to assess the status of banking loans. I find it better to stay away from the banking sector in all countries we invest in,” he said.

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