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The Indian economy ( INDY , quote ) was treated to a rare piece of good news this week with headline inflation falling much more sharply than anticipated. Does this mean time to jump into stocks with broad exposure to the Indian economy?

Wholesale prices in the Indian economy grew only 6.87% , down substantially from the 7.25% increase reported the previous month .

Although on the surface these numbers look like the inflationary situation in India is improving, economists seem to be a bit puzzled. The fundamentals would otherwise indicate that inflation should have risen for July.

The Indian economy and its rate of inflation is particularly susceptible to a rise in crude prices; the country is a net importer of fuel. However for the month of July, power and fuel inflation decreased even though the price of energy rose during this period of time.

This anomaly has confounded economists, leading many to conclude that this drop in inflation is probably a one-off event.

As a result, few observers of the Indian economy are under the impression that the Reserve Bank of India will take the opportunity to lower interest rates in an attempt to stimulate the economy.

In other words, the Indian economy is not yet necessarily ready to emerge from its stagflationary quagmire. The structural concerns that caused the country's economic situation to devolve remain intact. Until further corroborating evidence materializes that the decrease in inflation is more than a singular outlier, the central bank is unlikely to lower interest rates.

In turn, these decent inflationary numbers are not sufficient reason to jump back into the Indian economy. In fact, for traders who are long India, the recent move higher in Indian equities plus positive momentum from these numbers could be an opportunity to sell some long positions before the next leg lower.

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