Wall Street Meltdown: A Blessing in Disguise for Indian Consumers

The recent crises on Wall Street, capitulation of Lehman Brothers, crises for Merril Lynch has had a catastrophic effect on commodity markets world over. The 'commodity bubble' has burst. This augers well for India which is dependent on imported energy. The commodity markets were subject of rampant speculation and the traditional rules of trading ie., the matching of demand and supply were thrown to the winds. With the commodity price correction, sanity has been restored in these markets.

The punters in global commodity markets are exiting in a hurry, because of the liquidity crises. The reduction in crude oil prices to around 90$/ barrel augers well for India's import bill. Oil will stabilse around the $100/ barrel mark in the short term, and the chances of a spike remain subdued, bacause of the slowing of demand. The demand for agricultural commodities for bio-fuel has also come down substantially after the crude oil crash. This will put less pressure on agricultural product prices. All this augers well for India in controlling the runaway inflation. The inflation has almost peaked out with the sanity returning to commodity markets. Indian Government's decision to sell wheat in the open market has cooled down the prices of cereals, and the record soyabean crop to be harvested soon will have a sobering effect on edible oil prices.

The prices of base metals on London Metal Exchange (LME) have moved southwards. Even steel producers are feeling the pinch. This may have a temporary negative effect on metal stocks, it augers well for the consumers of metals. This will ultimately lead to the peaking of interest rate cycle. The rate sensitive sectors like Banking and Automoblies are hoping for good times, with input cost reduction leading to a pick up in demand.

The myth that global commodity prices can only rise has been broken.