Surprise rate hike to have knee-jerk reaction in mkt

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It looked like it was an easy attempt to 5,300 on the Nifty or the market would at least float about there but the surprise rate hike on Friday evening has mixed things in the market a bit, said CNBC-TV18's Managing Editor Udayan Mukherjee. "Not that the market was not aware that it was coming but the timing is certainly a bit surprising and therefore there will be a bit of knee-jerk reaction this morning. So the week starts off on a bit of a back foot for the equity and bond markets. Let's see how markets deal with a surprising rate hike and with what is going on globally."

Here is a verbatim transcript of Udayan Mukherjee's comments on CNBC-TV18. Also see the accompanying video.

On the rate hike

The market has seen this coming for a while. But even so, when it's delivered, there is always a bit of a reaction at least for the weaker hands that might just get thrown about a bit. The markets also little bit heavy in terms of positions and therefore you might see a bit of an impact here. But as you said this is something which the market is been discussing, debating, pontificating on for the last many weeks. So I do not think beyond a point it should have any material damaging impact; sure it stops the trend for now.

But the key point is now the debate focuses on what happens in April from the Reserve Bank of India, what is the pace at which interest rates go up during the course of 2010 because right now it's all out and open, it's not a subject of speculation any longer.

On market reaction

The timing is unfortunate because we were talking about breaking into a new zone and outcomes the bit of news, which will certainly dent it back from here. So in terms of timing it's a little unfortunate for the market but these things do not wait for Nifty levels. The Reserve Bank of India (RBI) has done what it chooses or what it thinks is a right thing to do at this point in time. A lot of people have been complaining in the market that the RBI is falling behind the curve so you cannot criticise it for not acting and then criticise it for acting as well.

So there will be a little bit of a dent but whether there is a meaningful or a large sell off precipitated just by this that I am not quite sure about unless things bunch up together and more bad news follows, like you are seeing with the global situation now, the dollar is moving up once again, commodities have sold off a little bit, there are some dire warnings coming in from International Monetary Fund (IMF). So if that also becomes a little murky now, the global scenario then the combination of events might peg the market back.

But this by itself is probably a day or two of adjustment and not significantly more than that.