India’s proposed retro tax rules a ‘big mistake’: Mark Mobius

Macquarie’s Asia hedge fund in March exited its short positions in Indian single stock futures in response to the controversial proposed tax rules,fearing they would lower investment returns.

Mobius’s team manages $50 billion worth of emerging markets equities for Franklin Templeton Investments,an arm of US money manager Franklin Resources Inc.

India constituted 16.1 percent of Mobius’s $17.7 billion Templeton Asian Growth Fund as of end-March. The flagship fund had Indian software exporter Tata Consultancy Services among its top-10 holdings.

Standard & Poor’s last week cut India’s credit rating outlook to negative from stable,reflecting the toll that hefty fiscal and current account deficits and political paralysis are exacting on Asia’s third-largest economy.

The agency warned the country had a one-in-three chance of losing investment-grade status.

“If it actually happens,it will be a big shock. The market will be shocked and prices will sharply decline,” Mobius said.

On China,the fund manager said the political scandal over deposed provincial political leader Bo Xilai reflected increasing pressure the country faces on political reforms but added it was not a big problem for equity investors.

“This is well isolated in one province and I don’t think this is a big problem,” Mobius said.