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Decoupling revisited

Decoupling revisited
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First Published: Wed, May 20 2009. 12 25 AM IST
Updated: Wed, May 20 2009. 12 25 AM IST
The splendid stock market rally since early March has now taken equity prices to dizzying heights. Should we be scared?
A lot depends on whether Indian economic growth and company earnings do indeed accelerate later this fiscal year. And that, in turn, depends on whether the global economy also recovers.
Or does it?
It was not too long ago that many analysts and investors embraced the beguiling idea that emerging markets such as China and India could continue to steam ahead despite the growing problems in the rich world.
The idea died a natural death in early 2008, as it became increasingly clear that no economy is an island.
But investors seem to have rediscovered decoupling all over again, without explicitly admitting it. Emerging markets have been handsome outperformers since October.
Decoupling is still a far-fetched idea, though countries such as India are likely to recover before many others.
How soon that will happen is anybody’s guess.
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First Published: Wed, May 20 2009. 12 25 AM IST