Indian stocks remain expensive despite correction; better value overseas: Mohnish Pabrai

Mohnish Pabrai, Managing Partner at Pabrai Investment Funds, believes India continues to offer strong long-term business opportunities, but says valuations are still not attractive enough for him to increase exposure to the country. Instead, he finds better risk-reward opportunities in several overseas markets.

Pabrai said recent corrections have improved valuations in India compared with two or three years ago. However, he believes prices have not fallen enough to justify meaningful fresh investments. He added that he will continue monitoring the market and could raise his India allocation if valuations become more compelling over the next few years.

Pabrai, who invests globally, said his investment decisions are driven by relative value rather than geography.

"When I look at the opportunities in India and compare them with opportunities in other places, the issue is that India has some really good businesses with great prospects. The issue is that it also has some very smart investors who have... priced those businesses to perfection," he said.

According to Pabrai, India's investable universe is relatively small despite having more than 5,000 listed companies.

"Maybe 100 or 200 of them have great governance, great business models and great management," he said. "Those businesses are very well known, very well liked, and bid up too much in price, in my opinion."

He added that quality companies often trade at valuations that leave little room for attractive long-term returns.

"So usually, when I encounter a great business in India, I will usually find that it is either fully priced or, more often, overpriced," Pabrai said.

The veteran investor said his global mandate allows him to search for opportunities across markets, making it easier to allocate capital where valuations are more attractive.

"On a risk-reward adjusted basis, I have to invest where the greatest opportunities are, and that can change," he said.

Pabrai noted that India has offered compelling value at different points in the past and acknowledged that valuations have moderated after the recent market correction.

"Today, India is better value than it was two or three years ago," he said. "But they have not adjusted to the level that entices someone like me."

While his current allocation to India remains low, Pabrai said he continues to track the market closely.

"I keep watching, and it might become an interesting place in the next few years. We'll see," he said.

For the full interview, watch the accompanying video



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