Indian investors have now got accustomed to look west over the past few weeks. After all, it was the US subprime mortgage crisis and the severe credit crunch in Europe that have rattled the global markets since the middle of July.
We suggest they look east as well, because there is trouble brewing at the other end of the world. What is happening in Japan could prove to be a problem in the weeks ahead. Japan has had interest rates of close to zero for many years now, as its central bank tried to reflate its stagnant economy by making money cheap.
That has led to the yen carry trade, where investors borrow at dirt cheap rates in Japan and use the money to buy high-yield currencies and assets in other markets.
This carry trade may now be unwinding, as investors sell assets to repay their yen loans. One indication: the Japanese currency has climbed. New Zealand and Australia have already been savaged. It is not clear how much of the carry trade money has come into India, but watch the yen.