Out Fox The $treet

With so much negative news surrounding emerging markets and the strong gains in the US market, it is interesting to see India slowly climb to multi-year highs. In the last couple of months, the Bombay Sensex Index has climbed over 21,000. The index originally reached over 20,000 in December 2007. Since that point it has gone virtually nowhere. See the chart below: The best that I can tell the index actually reached an all-time high after spending the last six years consolidating. India appears set for a major breakout and maybe the best stock to play that move in the US would be ICICI Bank (IBN) . The major Indian bank with a market cap in excess of $20B actually hit a peak of over $70 back in early 2008. The stock has lost 50% of its value during those nearly 6 years (sounds like the NASDAQ bubble from 2000). It might be a good stock to own in 2014. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

India's headline inflation plummeted in December following the previously announced sharp drop in food prices. The inflation figure came in at 7.5% down from 9.11% rate reported for November. While generally inline with consensus, the reading provides solid confirmation that India has been able to use monetary policy to slow the inflation rate. Now the real question is how low the rate will drop and whether this will provide enough room for the RBI to drop interest rates. Simple math suggests the rate will see further drops as such a huge drop suggests month over month inflation is flat lining. Of the components, manufacturing inflation remained at 7.4% while fuel inflation only saw a modest decrease to 14.9%. Just don't see how fuel inflation can remain so high if oil is virtually flat this year. Only currency could explain stubbornly high prices and that will reverse in due time. Per CNBC.com report : The wholesale price index (WPI), the main inflation gauge, rose ...

Don't look now, but food inflation in India is now under control. Prices of primary food items r ose only 0.4% in the week ended December 17 from a year ago. Lower food inflation places less strain on the economy and lowers the overall inflation rate allowing the RBI to begin easing monetary policies. Rates were increased 13 times since March 2010 and has started having a major impact on growth. Inflation is expected to drop to around 6% in the next few months and maybe lower if food prices are any indication. As I wrote recently for Seeking Alpha, India stocks are ripe for buying as inflation comes under control. A lot of the fears were misplaced as the sharp drops in commodities from the credit crisis lead to artificially inflated price increases by the start of 2011. Now after some cooling of growth, inflation rates have dropped dramatically and as the world economy goes into 2012, prices for most commodities will show year over year declines. The the deflation calls s...

As I've been saying the last few months, the inflation scare was a tad overdone. A good part of the emerging market inflation had to do with plummeting of prices in 2009 followed by the sharp rise in 2010. This lead to the misleading year over year increases instead of looking at a smoother change over the last 3-5 years. Last night, India reported food inflation had dropped to 4.35% for the week ending December 3rd. This was the lowest reading since February 2008. Amazing that India didn't report any numbers below that for the rest of the crisis especially in late 2008 or early 2009. On top of this,, the economic advisor listed in the Reuters report expects a drop to 3% within a month. We're working on a series of reports focusing on the emerging market opportunities especially now as inflation fears come under control and central banks have begun loosening monetary policies. Not many better investments exist than buying high growth stocks at 1, 2, or 3 year lows ...

After a very cool summer in the markets, emerging market equities appear ready to emerge from the depths of massive losses for a warm winter. Inflation fears pushed investors away from the fast growing sector in droves in 2011, but now that inflation has begun easing now might be the time to return to the sector. Almost all of the emerging markets are down for the year, especially the leading BRIC markets. These inflation fears were somewhat misplaced since they were based on year over year comparisons of very volatile commodities. For example, copper prices soared to $4.6/lb in February which was a lot higher than in 2010, but only slightly higher than the peak back in 2008. Is that really inflation especially rampant inflation? Read the full article at Seeking Alpha. Disclosure: Long IBN. Please review the disclaimer page for more details. 

Interesting CNBC story on the inflation story in India. The good news is that India inflation dipped in April to 8.66 from an adjusted 9.04 in March. The bad news is that the February number was revised upward by 1.23 percentage points meaning that the April number could possibly be closer to 10 percent. The bizarre news is that the fears for higher inflation consist of a widely expected increase in state-set diesel prices. Maybe its only bizarre to me that goods that have government subsidies would be counted at the subsidy rate and not the market rate. Or at least when factoring inflation, the government should set policy based on what the market rate would be. After all, oil prices have plummeted in May so if anything the country is looking backwards and not forward. Now thats not much of a surprise for India. Emerging market stocks have been weak this year because of the higher inflation fears and rising interest rates, but the plummeting commodity prices should be bullish but...