Mark Mobius, Founder of Mobius Capital Partners, believes companies around the globe will be targeting India as the next big market. And one of the key reasons for this is its young population.

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With 30% of the population in the Gen Z category (15 to 25 years), Mobius anticipates a transformative shift in consumption patterns.

In an exclusive chat with CNBC-TV18, Mobius shared his views on Indian market, artificial intelligence, and his next big venture.

Below are the edited excerpts of the interview.

Q: You stated that you plan to work on new projects in Dubai. So what would your focus area be in your new capacity?

A: Actually the base is Dubai, but it's going to be global emerging markets again, but the focus will be more on technology. We are looking at companies and situations in areas where artificial intelligence (AI) is being used more extensively, and the entire digitalisation of the economies around the world, particularly in emerging markets is very important and of course, India is probably the best example of that.

Q: So are there any tech-focused AI companies in India, which have caught your fancy so far?

A: Not yet, we haven't identified any specific candidates. But we are looking very hard, not only in India but globally. It's important to remember that when we say tech, it doesn't necessarily mean a technology company per se, in other words, a semiconductor company, or a PC company, but companies that use technology to improve their profitability and their efficiency and that's where AI comes in.

Q: Recently, Mark, you tweeted your cautious stance on investments in the China market as well. You spoke about how the domestic market in China is struggling a bit. Does that mean that more money will flow into India versus China over the next 12 to 18 months?

A: Well, it's already happening. If you look at the numbers, you will see flows of money coming into India have been quite substantial and are increasing. And that includes not only portfolio investments but also private investments. So India is going to be getting a lot of money that normally would have gone to China. Of course, there will be investors who will want to go into China and keep investments in China, but India is going to be the beneficiary of this trend.

Q: Mark, you have always been bullish about India excited about its tremendous potential, but are you concerned about the valuations?

A: No, not really, because what we focus on is not necessarily the price-earnings ratio or the price-to-book value ratio, but we are looking at return on investment. And it's amazing when we do scans of the Indian market, how many companies have a high return on investment, which is a good indicator of growth prospects because if you have a high return on investment, you have a lot of money to reinvest and grow. So this is quite a very interesting phenomenon that we've seen.

Q: Coming back to your focus area, which is technology and artificial intelligence, that's a broad umbrella. There are so many spaces in which AI is used nowadays, healthcare engineering infrastructure, what do you believe will be the next growth area under this umbrella itself?

A: You are absolutely right, it's a broad area and if you look at things like blockchain, again, it's used in every industry now. But I would say at the beginning, the companies in which we would be most interested would be those in the software area, companies that are actually developing AI tools that companies can use so that would probably be the first focus. But soon after that, we will move down into companies that are actually using AI and increasing their profitability as a result.

Q: So globally, which would be the best example I am not saying you have invested in a stock like that, but which would be the prime example of a company that you would like, one which is manufacturing AI tools for the world?

A: Probably one of the best examples from a global perspective would be companies that are in the consumer area and using distribution patterns to an AI to improve their distribution and their customer base and probably the very best example globally would be Amazon. Amazon is using AI and all kinds of other digitisation tools to improve their investments and also to improve what companies and products they should be focused on for their customers.

Q: Recently you put out a tweet where you said that you envision the investment landscape in India, evolving to mirror that of the US and that's a tall statement, because you say that there will be a balance between active and passive strategies and you foresee mutual funds and ETFs gaining substantial traction. And if you look at the market right I mean out of 144 crore people that we have in India, barely 16 crore people have mutual fund folios at the moment, which is not even 11% of the Indian population and investing in mutual funds currently, what do you see as the scope of growth in passive investing over the next one to 10 years?

A: It's going be very, very rapid because more and more Indians are aware of the opportunities in the stock market, in the bond market and you are going to find incredible growth. In my recent visit to India, I was, by the way, in India for about a month, this last month, visiting seven cities altogether. It was amazing to see the growth and interest in equities among the population. So I think this is going to be a big, big growth area. Some of the companies we visited, were doing this, they were serving retail clients with a portfolio of index funds and actively managed funds. So I see this as a pattern, the pattern that we have seen in the US will be duplicated in India.

Q: So when we talk about India's tremendous potential one, of course, is this rapid financialisation that we are seeing. In your tours of India over the last four decades can you tell us what has changed? What is it that excites you the most, enthuses you the most in terms of the progress that we have made, which makes you bullish on the market and the economy?

A: Probably the biggest change and the biggest mover for India has been the adoption of technology by the government, the digitisation of the government services, first starting with the identity card, but then moving into so many areas, which has made government more efficient, and has made the individual Indian citizen aware of the opportunities in technology for them in their own life. So I think this has been an incredible journey. I think Mr. Modi has to take responsibility and credit for this change. It's quite a sea change and something that is quite remarkable.

Q: So the adoption of digitisation by the government, which has been a big focus area is something that continues to be of interest to you. Where else do your interests lie in the Indian market over the next say, 12 to 18 months?

A: I am very interested in the travel and tourism area, because on my trip recently to India, all the sites, all the historic sites were packed with Indians. We were the few foreigners there, but I am sure more foreigners will be coming. But it's the Indians who are now really having the money and the eagerness to visit their historic sites and tourism sites and this is a big, big growth area, I believe.

Q: Just start zooming out a little bit how do you see the environment for global markets next year? We have seen yields cool off, and crude prices have also climbed down. Now this year was one of the best years for the United States. We had the S&P 500 rallying 20%, and the NASDAQ gained 35%, what kind of global environment you will envisage the next year 2024?

A: I think it's going to be pretty good because you are seeing inflation coming down pretty rapidly and interest rates, of course, will follow and are following. So the market should be in a pretty sweet spot for that reason. However, it's important to note that with too much of a decline in money supply, of course, markets sometimes suffer from a lack of liquidity. So that's something we have to look at. But I would think that we are looking at a pretty good year coming in the markets, it's going to be very interesting, and I think exciting.

Q: Are you withstanding the possibility of no Fed rate cuts because the street is right now pencilling in the Fed cuts rates, which will be positive for equities globally? What if that scenario doesn't play out?

A: It's very important to remember that there's no direct correlation between interest rates and the market. Sometimes interest rates go up and the market goes down. Sometimes interest rates go down and the markets – it is not a direct correlation. So given that situation, we have to look at other factors. And the other factor in the US is, of course, the economy, the growth of the economy. Hardly enough with all the challenges China, Ukraine, and every other challenge you could think of globally, the US actually becomes more active, and industry tends to benefit from these kinds of changes. So we are seeing employment at high levels, and the economy doing very well, even in this very difficult political environment. So I think this is going to continue into next year.

Q: I want your thoughts on how India is one of the youngest economies right across the globe. I mean, if you look at Gen Z, as we call it, 30% of India's population is in this age bracket of 15 to 25 years, and they will be the next big consumers. What do you see or rather, how do you see the consumption pattern evolve and as an investor, how would you capitalise on this?

A: Well that is the key, the key is the use of the Indian population that's really very exciting, not only for India, but for the globe. Because it means that companies around the globe will be targeting India as the next big market. So this is going to be very, very exciting going forward. One of the reasons why you are going to see much more investment in India is because of that, companies around the world will want to take advantage of this young population who are getting richer, and who are ambitious, want to work and want to play, want to spend. This is all very exciting.

Q: Your new book is out ‘The Inflation Myth and the Wonderful World of Deflation’, can you tell us the core thesis behind this book?

A: I wrote the book because I found that the inflation statistics were not very accurate that's the first thing, but also wanted to point out to people that technology is actually making things cheaper. Now, in currency terms, things look like they are getting more expensive. But if you look at the quality, quantity, and availability of high-tech products, products that have been impacted by technology, you will see that life is getting much, much better. We are actually in a deflationary environment because economists hate the word deflation, but that's actually what is.

Q: So finally, Mark, you want to advance your target, the last time we spoke, you had a Sensex target of I think, one lakh in the next five years, we are already at 66,000. Do you want to speed it up a little bit?

A: I think I will stick to that. I don't want to go much higher than that, at least at this stage. Ask me next month.

(Edited by : Shweta Mungre)