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Mint road has sent out the signal, and the markets are pleased as a punch. First time since the Budget, the equity market closed the week on a positive note on Friday, May 3.

The signal is clear; the Reserve Bank of India is concerned about both growth and inflation. It is ready to adopt a wait and watch policy, while the government fires away at containing prices of food articles and key manufactured products like steel and cement. So the 75 basis points increase in the cash reserve ratio in the whole of April came as a pleasant surprise to both the equity market and the debt market as well.

So the equity markets have started crawling back to 17k plus levels, the rates in the bond market remained stable, despite inflation numbers soaring to the 7.5% level. They also get assurances from the finance minister and other key personnel that inflation will be battled and interest rates will not move inordinately higher.

While the banking fraternity will have to remain tight and manoeuvre carefully in the coming days, as the 75 basis points increase has the ability to shave off 15 basis points from their earnings, corporate India breathes a sigh of relief.

For the investor community at large, another scare seems to be disappearing slowly. Earnings erosion this quarter and the scare of huge dents in the balance sheets of corporates due to overseas derivatives exposure, is not as large as it was initially thought to be.

Net earnings of around 825 companies have grown by 19.5% over the previous year's quarter. There is not much variance between what the market had estimated and what has been reported. "At least the scares are not there," says Rakesh Malani, a stockbroker based in Mumbai, echoing the sentiments of many in his community. Earlier, experts had reckoned that the losses due to derivatives could be in the range of Rs 15,000 crore to Rs 20,000 crore.

The fact that overseas institutions have remained optimistic and not deserted India totally also brings in some amount of confidence.

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