By Ruma Dubey

Well, the IIP data on Friday was disappointing, yet the market went on to close the day 376 points with 136 stocks hitting the 52-week high.

And today evening, the CPI data came in much lower, driven by lower food prices at 9.87% v/s 11.24% (MoM). December food inflation came in at 12.16% vs 14.72% in November. Naturally, the market is sure to be enthused tomorrow; it now has a legitimate reason. Or did it have an ear to the ground and already knew that CPI would come in low. Does this mean that the market has already discounted this fall?

Some more inflation internals - The rural and urban areas CPI for Dec are 10.49% and 9.11% respectively. Inflation rates for rural and urban areas for November 2013 are 11.66% and 10.53% respectively. Food and beverages has come in at 12.16% v/s 14.72%.  Fuel and light has also decreased marginally from 7% to 6.98%. While clothing, bedding and footwear has risen to 9.25% v/s 8.94%. In terms of statewise inflation, Meghalaya has the highest whereas lowest is at Dadra, Nagar Haveli.

The big question now – what will RBI do on 28^th January? Well, the Governor surely knew what he was doing and saying last month when he held on to the rates, maintaining a status quo. So this time around too, on 28^th January, he could stay put and not do anything; at least that will be a huge relief for growth, which is already hurting.

But wait to see the growth or fall in the core inflation or WPI rates. If that also moves down, then it will be a no brainer – RBI will maintain status quo.

Undoubtedly, these are tough times for RBI and any decision is not going to be easy. A pause, in all likelihood is what RBI will take. It might choose to wait and watch rather than do things just because a neighbor did it. Thus January might be an easy month for the Governor but coming months could once again put the RBI Governor on the tightrope, walking with trepidation.

Thus under the current circumstances, we can rejoice the Dec inflation if we decide to just live for the day. But if we want to be more pragmatic and show foresight, January too might be an easy month for inflation but going ahead, things might once again get sticky.