Stock Shastra

With the Nifty going higher every week, the markets have witnessed a sudden rally for the past few months. While there have been a few sectors which have done extremely well during this period, a few sectors have lagged behind!

Which are these sectors? And what are the reasons for this rally?

Inflation rates have been consistently over 9% for several months now. High prices of food and essential commodities have kept it at such high levels. Though the various measures by RBI have helped to moderate the inflation to a certain extent, it still hovers in an uncomfortable zone. Bringing down the inflation rate has been on top of the agenda for RBI, given that high inflation has severe effects on the common man.
Read on to find out how Inflation affects the common man.

On Friday, RBI raised Repo rates by 25 basis points or 0.25%. The RBI Governor has continued with a hawkish monetary policy given persistent high Inflation over the last two years. Inflation for August inched higher to 9.78% and RBI has made a clear choice of favouring Inflation control over losing some growth.
Slowdown pressures are building up in key segments of the Indian economy. As a result core IIP numbers (IIP numbers without Capital Goods Industry) have come in lower at 6.5%.
We believe that India’s Inflation is more supply side inflation, and the Governement. policy is a more robust tool for impacting Inflation than RBI’s Monetary Policy. Fiscal Policy, targeting investment in specific industries and faster rollout of Government infrastructure plans would have had beneficial impact. But Government inaction has forced RBI’s hand.
So, how does this interest rate hike affect your wallet?
This latest bout of Interest rate hike may lead [...]

Shriram Transport Finance Company Ltd. (STFC Ltd.) is a major player in the pre-owned commercial vehicle (CV) Finance segment. It has over 36000 Cr. asset under management and finances almost 90% of India’s truck owners.

With a huge experience of more than 3 decades, it has developed strong competencies in the areas of loan origination, valuation of pre-owned trucks and collection. However, the increasing inflation and increasing interest rate scenario are a huge threat to the company’s margins. Also, going forward, interest rates are not expected to relax soon.

Looking at this, should you invest in STFC Ltd.?

Back in the 1980s people got an impressive return of over 12% on their deposits. The equation was simple: “Paanch saal mein paise double”. However, times have changed today. Now, the interest rate stands at a miserly 8% compared to the 12% seen earlier.
Our economy has evolved a lot since those days; we are currently one of the fastest growing economies in the world. But the earlier time seemed so much better as you got higher returns! So, what is the real deal? Was the high interest rate in 1980s a better situation than today? What is the relation between the growth of an economy and interest rates? How does the interest rate affect the stock markets? And above all what should your action plan be considering the impact of interest rate on stocks?