Indian industrial output edged up a mere 3.6% in February, indicating that rising interest rates are choking economic activity in the country faster than economists expected.
With the market keyed up to see an output number more like 5.1%, this is not especially great for Indian stocks — and could create room for another nice growth scare for Mumbai.
The fact is, 3.6% expansion is not especially great on a global basis. Traders can get much better growth opportunities in China, Brazil or even old Germany
And it is likely that interest rates are still going higher as food prices remain at near-record levels. Inflation is probably around 8.36% and as yet rising — watch out for the next number on Friday, followed by a rate policy meeting on May 3.
Paradoxically, lending activity is spiking as would-be borrowers move fast to lock in rates before they rise any higher. This is only making inflation accelerate as rupees move faster through the economy.
Throw in oil approaching $125 a barrel, and the brakes may hit pretty hard when they hit. Not bullish in the near term for the rupee, much less ETFs like the WisdomTree Dreyfus Indian Rupee ETF (NYSE:ICN) that aim to track its movements.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.