‘Commodity inflation to continue on Indian demand’

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Wednesday, May 07, 2008 at 1204 hrs The demand for oil and raw materials from the world's two fastest growing economies -- China and India --is providing a counterbalance against the slowdown in the US and in turn will lead to continued surge in commodities prices and trading volumes globally, a latest report says.

According to global market research firm Datamonitor, the upheaval in equity markets and the continuing credit crisis would ensure the steady stream of investment into commodity markets, as financial players are attracted by the higher returns that are currently available.

"The rapid growth in commodities trading volumes and prices will continue, as fundamental demand in China and India for oil and raw materials is providing a counterbalance against the downturn in the US, " the Datamonitor report stated.

The report revealed new entrants are flooding into the market in large numbers, in many cases without physical exposure to the underlying commodities, which is contributing to market volatility by exacerbating any movements in price.

The price movements coupled with the rise in electronic trading is causing risk management strategies to be re-evaluated in light of the breakdown of historical trends, the report added.