Mark Mobius, MD of Templeton Asset Management says that things are looking better post the recovery in emerging markets but he still advises people to be cautious.

He adds that they have no redemptions in India and they are getting net inflows and not outflows. He feels that commodities and consumer sectors are looking good in India at the moment and oil and gas, iron ore are sectors that he is buying into, in India.

He further adds that Indian markets are expensive as compared to the other emerging markets and the Indian markets have been overvalued for sometime and remain so.

He is expecting global growth to slow down. Moreover he says that if oil prices keep rising, money from Middle East & Russia, "will keep the fire burning."

Excerpts with CNBC-TV18's exclusive interview with Mark Mobius:

How are you feeling about emerging market equities now with all the water that has passed under the bridge over the last week or so?

I think things look much better now, and there has been a nice recovery in many of these emerging markets. But I have to emphasize that we have to be cautious in view of some of the very big rises we have seen over last few years.

Many of these markets have performed exceptionally well and these kind of corrections that we have seen are normal in a bull market, but we also must keep our eyes on the valuations to ensure that we are not buying stocks which are too expensive.

What is your perspective on global liquidity now and how much more do you expect US to tighten rates or raise rates from here on?

As regards to liquidity, I don't think you are going to see an increase in global liquidity in fact you will see decrease as result of these interest rates rises. That means more money will flow into US rather than going out into emerging markets. So it will probably be the general trend towards the US investments.

The other factor is what happens to commodity prices because if oil prices continue at these higher levels then Middle East money, and money from Russia will keep the fires burning.

Is the worst over for emerging markets and will emerging markets like India continue to enjoy that flush of liquidity in the next few months as you see it?

I don't think so, I think you are going to see continuing caution in the view of the correction that we have seen. In addition if you see some of the valuations in some of the emerging markets, the valuations are rather high relative to markets in Europe and America.

Of course emerging markets in general are still cheaper than the US or Europe but they have come up and they are getting close and in some cases they have gone above what you see in other markets.

Emerging markets have better growth characteristics but lot of people are thinking that now global growth will slow down in view of the interest rate hikes.

For India as a case in point, would it be fair valuation or has it moved back into the overvalue zone?

I think in India we have had overvaluation for some time and that is still the case even after these corrections. One must remember that other markets have also corrected and so the valuations in India are fairly high, much higher than the average emerging markets. The latest numbers that I have is that in India it is about 20 times versus 14 for emerging markets on a price earnings basis.

On a price to book-value basis, about 4 times in India versus 2.3 for emerging markets. So there is no question that India in general is more expensive, however there are some individual companies in India that are attractive in certain sectors are not expensive and those are the ones that we have concentrated on.

Are you in the camp, which believes that US is headed into recession in the next few months and secondly how much do you think the Fed will raise rates from here on?

I don't see recession on the horizon, we have to go with what the numbers are telling us in US and Europe. The numbers are telling that growth is still good and we are seeing good growth in those countries, in those areas. So I think it would be premature to look at a recession globally, I just don't see that yet.

On interest rates in the US?

Interest rates, in the US again, given what they have done so far, they maybe a little more cautious. It really depends on what key leads they are looking at, but I am sure they are concerned about growth; they want to continue good growth in America.

They will be cautious about interest rates and if you are looking at inflation there is no question that inflation is moving up at a higher pace. So one will argue and say let us not count oil, let us not count crude and then the inflation does not look too bad. But I do not think that makes sense because they have to look at the whole picture and the where inflation moves.

How do equity markets shape up from here because bond yields have started to move and commodities are recovering. Will equities remain as hot an asset class?

I think they will not be as hot as they were in the last few years because we have seen this tremendous rise. Unless there is more of a correction then ofcourse one will see volatility and prices will move up again.

Nevertheless the growth characteristic for emerging markets is such that we have many more years to go and a lot more tightening in emerging markets than in developed countries. So one cannot predict what is going to happen to prices from month on month or maybe year, but as long as we can find good investment bargain we would be out there buying.

What do you like in India, you made the point that while the overall market maybe expensive, and some parts of the market maybe not and when the big savage fall happened what did you pick up in India?

The kind of stocks that we have been looking at both commodities and the consumer have been the ones we have our eyes on. The consumer market in India is growing at a fast pace and we want to get that exposure.

On the commodity side some companies in India have a good handle on commodities like oil and gas, iron ore etc and those are the companies we want to look at, because commodities seem to be continuing to run at a very high level. Maybe even if they correct, they still would be rather high according to our calculations.

You did not see too much redemption from your fund in the last couple of months, did you, particularly the BRIC fund that you were launching?

No, actually we are getting net inflows and not outflows so that has been fairly good. It shows that people are looking at longer term, which is a good indication of what is happening.

For more on markets & business, log on to www.moneycontrol.com