Monday, July 14, 2008

The "I" Is Being Incinerated

Beware of Crumbling BRICs - Seeking Alpha: "The 'I' Is Being Incinerated

The 'I' in BRIC, India has been one of the emerging world's most popular markets in the last few years. But now the country faces a big reversal of its recent fortune.

For starters, the Indian stock market, bond market, and currency are all getting incinerated as inflation soars, and investors lose confidence in the economy.

Wholesale price inflation is running at 11% in India - the highest level in 13 years and climbing. The Reserve Bank of India responded by raising interest rates, but it may be too little too late.

Investors are scared that a combination of accelerating inflation and more rate hikes could derail India's record 8.8% annual growth.

Overseas investors are pulling money out of India at a record pace now. Investors sold a net US$6.2 billion worth of Indian shares so far this year, sending its benchmark stock index plunging 30% in value.

Bond prices and India's currency, the rupee, have also come under intense selling pressure. The rupee, which had been one of the world's strongest currencies, retreated 8% in value this year. That's its worst performance since 1993."


Post a Comment

<< Home