However, at the other side of our planet of "global warming" Nomura is concerned about the inflation running high in India:
The RBI has left interest rates unchanged in its policy review on 29 January 2010. Although the RBI has hiked the cash reserve ratio (CRR) by 75bp, the market should heave a sigh of relief, as it has been concerned about rate tightening owing to inflationary pressure. Although we have been expecting a rate hike, the fact that
the RBI has opted to keep rates unchanged does not constitute a fundamental change, in our view, that a tightening is inevitable. We believe inflation remains the key issue, which will drive the markets, and we still expect the markets to face some more downside risk from here.
Food price inflation in India is now being joined by wider systemic inflation, driven by demand-side factors as expansionary policies work their ways through the system. Rate cyclicals remain particularly vulnerable to an expected market correction.
Click on chart to enlarge, courtesy of Nomura.
From the hell in the hands of Devil?