India has reported a surge in industrial growth for the month of April 2010. Growth came at 17.6% YoY. This was largely on the back of strong performance by the manufacturing sector, which grew by 19.4% during the month. This growth in April is almost a two decade high. And it is very close to 17.7% growth achieved in December 2009. Given this pace, economists now expect India's economy to grow by 8.5% during the current fiscal, which ends in March 2011.
The rebound in industrial growth suggests that the economic recovery has started to take wings. It has also raised hopes that if the monsoons come as expected the economy will do pretty well in the current year. But it has also raised fear of inflation. And also the fear of the RBI raising interest rates. After all, the central bank has already been public about its concerns on balancing growth and inflation.
Inflation is already playing with the double digit mark. And it is showing no signs of cooling off, especially given that the demand is improving and so is the credit growth in the banking system. Within the inflation basket, while food prices are already ruling at their all time highs, fuel prices are expected to nudge up soon.
So overall, the concerns remain on the economic front. Given this, as also the grim situation in the western world, we see the stockmarkets remaining volatile for the time being. And these (markets) will be driven more by economic news flows as against corporate fundamentals. While such volatility and uncertainty might keep you nervous for some time, you can use any sharp correction as a chance to get into quality stocks at lower prices.
After all, as Warren Buffett had said once, "Uncertainty is the friend of the buyer of long-term values."