As widely expected, RBi cut the repo rates ( interest rates) from 6.75% to 6.5% and with this the total reduction in the last 15 months starting January 2015 is 150 basis points or 1.5%
However the market has behaved slightly different to the rate cut by a decline in sensex of 516 points on 2nd April 2016.
Just wanted to share how the sensex has moved for each of the rate cuts since last January which is below
Not all rate cuts have been received positively by the market
Market is expecting beyond the rate cut.
If you do a correlation and regression analysis based on the set of data available you will see that the correlation coefficient is – 0.74 which means the market is correlated inversely with respect to the rate cut.
The market goes down with the rate cut!
What are the reasons for this?
a. There is pick up in urban consumption but the consumption is not so good in rural areas
b. The rural economy is dependent on Monsoon and with two consecutive years of failure the demand has slowed down.
c. The expectations that the results of the quarter ending March 16 for various companies is expected to be muted or not very good.
d. Worried global economy and slow growth projected.
While there are many other reasons, the above predominant reasons, are having a negative sentiment and leading to a negative correlations.
What we as investors should know and be doing?
There are signs that the growth is picking up Read by clicking on this link
Are we at the inflection point? Read this.
These things only are indications that good things are yet to come and may be around the corner. Stay invested and
One of the easy ways is to start a SIP.
Keep this quote always in mind
Investors want to do today, what they should have done yesterday – Larry summers
We all have felt like this.
To start your SIP today, do contact me