CNBC-TV18’s Executive Editor, Udayan Mukherjee - It was quite something the way market shrugged off the inflation data on Friday because that kind of inflation data could have dented the market quite a bit but it did not. But over the weekend lots of noises have come in and Finance Minister has expressed his concern and spoken for the first time about 8%growth plus 4% inflation. RBI is sounding quite worried about it and first KV Kamath talked about it and now Deepak Parekh too throws his hat into the ring saying maybe things will get a bit tighter though none of them speak explicitly of a rate hike.
 
I think for the first time in many weeks the word rate hike has come into the picture. At best the view was that rates will not go down in April and we will have to wait for one more quarter but now forget about rate cuts, I think people are talking about rate hikes and the possibility of that and so it can’t be a very comforting scenario. We hear that in the next 2-4 weeks we could see inflation nudging close to 7% and that will sentimentally be very huge for the RBI to work with in its monetary policy this time around.
 
I don’t know what instrument they will use and in this it would be instructive to keep an eye on what the rupee is doing because quietly the rupee has come back to close to 39.80 as well. So maybe that is RBI’s first signal, that is one preferred way of dealing with current inflation and let the rupee appreciate. If that is the thing then it may not be such a bad thing. But you need to keep the rupee in perspective as well in line with what inflation is happening.
 
Is the inflation figure scary? – For sure it is. There are some people who wish it off as an aberration but this is a market which is staring at 6.7% inflation without anything like a full passed down of a fuel prices. I think inflation with fuel prices in this country if they are going to be passed down is closer to 8%. That is a horrible inflation figure to be working with. Crops or no crops in about 2 month’s time, a large part of it is coming from manufactured items including metals and so I fear for most of the commodity companies.

I think the government having being stung so badly with inflation number over the last couple of weeks will make it extremely difficult for any sort of price inflation in commodities in this country. So if you are a producing any commodity I think one can say goodbye to any kind of price rise for the next few months atleast.
 
There are many ways to look at it but from an equity markets point of view, this is bad news. How the RBI deals with it and what it does to interest rate expectations is something one needs to watch out for. But as far as macros goes, this perhaps is the biggest head wind for the market going forward and is not comforting at all.