Back after an unplanned break

Not having posted on the blog for almost 3 months due to an unplanned break, I am finally back and hope to post regularly as before. Its been an eventful first three months of the year for the stock markets. The broad view posted on 1st of Jan, 2007 has been on target to a large extent, with 3660 support level holding, not withstanding the panic lows created around 3550 levels. A high of 4245 was achieved, a tad below the base target of 4300 projected. So, where do we go from here ?
Taking into account the happenings of the past three months, as long as the support levels of 3660-3550 arent violated, the medium term trend remains positive. On the upside, closing above 3905 and sustaining it would open further upsides for an attempt at the previous highs. Global cues as well as political events within have been contributing to what we have been witnessing for the past one month. Of course, the same can never be negated but their influence in the recent days has been overriding.
Q4 results for FY07 as well as guidance for FY08 is what would be an event to watch from here on, with no real surprises expected in case of the former. The latter is what would be of interest, considering the rise in crude prices, rupee appretiation, artificial price control in case of cement and steel, and rising interest rates, not in the least, with an overly aggressive Central Bank trying to control inflation by raising CRR not once or twice but thrice in a span of just over three months by 0.5% each, from a rate of 5% in Dec 06 to 6.5% by April 07 (after the recent hike announced on 30th March 07), a rise of 30% in 4 months !
Personally, I do not think raising interest rates would bring down inflation from the current 6.5% to a targetted level of 5-5.5% by itself. Inflation, in a country thats on a growth path and targetting a GDP of 9-10%, is a given and cant be wished away as its a part and parcel of that growth phase. Higher interest rates, by itself, would only hurt the large middle class on India, mostly those with home loans, whose EMI keeps increasing every few months, with them having no option but to swallow the bitter pill. The percentage increase in their EMIs has been much higher than any increase in incomes they might have seen, which would result in them cutting down expenditure to balance their budgets, leading to lower consumption per se, and hence lower demand for goods. On the other end of the spectrum, higher interest costs would lead to either the companies absorbing the same themselves and keeping the prices same, which would lead to lower profitability, including the effect of lower demand as mentioned earlier. Or, they would pass on the higher costs to the customer, which would again effect demand to a certain extent due to higher prices on one hand as well as lower demand due to reason mentioned earlier. So, where is the inflation getting cut, except to the extent that lower demand would have brought in ?
Anyways ... we would focus ourselves on the FY08 guidance as well as global cues. At least they are more understandable and have some logic !