rates
Rates are the master price
The rule
An interest rate is the price of every future rupee, so when rates move they re-price every share at once - growth hardest.
Where it flips
It feels like only borrowers and banks care about rates. Where it misleads: you think a rate move touches only the rate-sensitive sectors. The fix: read a rate change as gravity on every valuation, heaviest on the longest-dated, fastest-growth cash flows.
A share is worth its future cash, valued back to today at some rate. Change the rate and you change the value of every share in the market together, like gravity acting on all prices. Shares whose cash lies far in the future - high-growth names - feel the change most. The reader reads the rate direction before reading any single company.
A worked example
A company's earnings are unchanged, but rates rise sharply. Its far-off future profits are now discounted harder, so the fair value falls even though nothing changed inside the business. A steady, near-term earner falls less. [illustrative]
How to spot it
- ·a rate move re-pricing the whole market together
- ·growth and long-duration shares moving most
- ·earnings unchanged while the valuation shifts
- ·the repo-rate direction read before any single stock
Warren Buffett · Interest rates are gravity for asset prices