From Jim Jubak:
Economists have started to lower their forecasts for Indian GDP growth. For the fiscal year that ends in March 2011 the Indian economy is projected to show growth of 8.6%. Recent revisions from economists put growth for the fiscal year that will end in March 2012 at 7.7% to 8.1%. That’s not a huge drop—but investors fear that growth will be revised still lower.
That’s a real danger since the Reserve Bank is giving no indication that it sees victory in the battle against inflation or indeed any sign that inflation is moderating. Bank governor Subbarao recently raised his projections for inflation for the fiscal year that ends in March 2011 to 7% from his earlier estimate of 5.5%.
With those trends in place, it’s hard to make an argument for investing in India now. Which means cash flows out of the Indian market are likely to continue and prices are likely to erode further.
Investors can, of course, make exactly the same arguments for Brazil, Indonesia, Turkey, and China and other emerging stock markets.