Parallel paths1 min read . Updated: 09 Mar 2011, 10:46 PM IST
A spike in prices of global commodities, including crude oil, has made investors wary of investing in emerging markets such as India, which are dependent on commodity imports to sustain growth. While domestic political and economic concerns sparked off the correction in November last year, investors’ focus has shifted quickly to oil and high food prices. The macro-environment has drawn parallels with 2008, when commodities were moving steadily up before they were stopped by the collapse of Lehman Brothers and the liquidity crunch that followed. This time, the commodity rally has been less sharp so far as global growth recovery is still fragile. Analysts observe that if crude prices continue to rise, it would adversely affect growth and should lead to some correction in prices of industrial metals as demand for metals slow. However, the combination of high food and oil prices might be here to stay for some time and pose problems for the Indian economy. Food prices will continue to remain high internationally, the latest Food and Agriculture Organization report says. Here we compare the trends in commodity and equity markets since the start of the year and in the 2008 pre-Lehman period.
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Graphics by Ahmed Raza Khan/Mint