What does a flagging commodities supercycle mean for the investor?
Rather than wonder if the supercycle has ended, keep watching for confirmations of continuity, or signs of reversal
From an Indian investor’s viewpoint, the debate on whether the supercycle of commodities has ended is relevant for several reasons. A declining trend in commodity prices can take the edge off rising inflation. It not only makes life less expensive for a consumer, but also ensures the Reserve Bank of India can stay the course on cutting interest rates. If the government gets its fiscal act together, all these factors can combine to get growth back on track. That’s the big picture. But falling commodity prices are a double-edged sword because India’s basic industries will earn less, affecting earnings, valuations and eventually growth.