The Reserve Bank of India is due to announce its annual policy on 24 April. Analysts believe that the RBI''s decision regarding the hike in interest rates at the credit policy meeting will decide the fate of the market. But they are at loss, to predict exactly what the RBI governor is likely to do. CNBC-TV18 reports:

Market analysts agree that the market is currently at a loss and does not know what to expect, as the RBI governor, Yaga Venugopal Reddy is quite unpredictable.

He may adopt a hawkish stance to rein in inflation, which has breached the 6 per cent mark. Inflation for the week ended April 20 is at 6.09 per cent versus 5.74 per cent for the week ended April 7. This is an eight-tick rise since last week.

The central bank actually intended to do a 50 basis point hike. (100 basis points = 1 per cent). It wanted a half a percentage point hike in the first quarter itself and break it gently to the market by splitting into two rate hikes.

The central bank has been very active trying to curb the liquidity supply in the market. On March 30, RBI had hiked the cash reserve ratio (CRR) as well as the repo rate in a move to curb inflation. It hiked the repo rate with immediate effect by 25 basis points to 7.75 per cent. The CRR was first raised to 6.25 per cent with effect from April 14 and further; it will be hiked to 6.5 per cent from April 28.

Do the precedents suggest that Reddy will raise the rates again?

Robert Prior-Wandesforde, Senior Asian Economist of HSBC Holdings Plc expects no changes in interest rates. He thinks RBI is not done with tightening, and sees a further 50 bps CRR hike in June. (See: Don''t expect RBI to hike rates tomorrow: HSBC)

"We are actually looking for a further move, a 50 basis points hike in the CRR, perhaps sometime in June. The interest rates are still at very low levels, still pushing demand growth well above supply. Despite the tightening, the economy will continue to exceed at a sustainable rate, and that in turn, will be consistent with further signs of overheating in India over the coming months." he says.

He also foresees a possible 25 basis points on the repo rate in the long-term.

Malcolm Wood, Asia-Pacific Equity Strategist of Morgan Stanley feels that there are concerns on liquidity and the RBI will need to tighten the rates more. (See: Concerned about liquidity in India: Morgan Stanley)

"We think that RBI is doing the right thing and will need to do more in terms of tightening policy to ensure that this inflation overheating concerns don''t get out of control in India," he says.

However, he is undecided on what the RBI governor will do at tomorrow''s credit policy meet:

He elaborates, "It is good to see that RBI is seriously looking to set a real interest rate again in India and looking to cool the economy. So it is a bit of 50-50 given those moves, as to whether they will move again tomorrow. But if they don''t, that certainly would be leaving no doubt in the investors'' mind that they have got a biased tightening going forward."

As for the markets, they had a dream run early Monday. The Sensex opened above the 14,000 mark in the morning, while the Nifty rallied above the 4,100 mark in early morning trades. The markets were not very far from their all-time highs - just about 800 odd points on the Sensex, and a couple of 100 points on the Nifty.