Rate Hike Cycle - Nifty's Performance is Extremely Surprising 😲

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When everyone is going gung-ho about Rate hikes and talking about it’s debilitating impact on the equity markets, I tried to dig up some data about the rate hikes done by RBI and how that impacted Nifty.

Rate Hike Cycle - Nifty’s Performance

Starting Date End Date Duration Rate Hike Opening Price Closing Price Point wise return % Return
Sep 1, 2004 Sep 1, 2008 4 Years 4.5% to 9% 1635.4 4348.6 2713.2 165.90%
Feb 1, 2010 Feb 01, 2012 2 Years 4.75% to 8.5% 4899.7 5235.7 336 6.86%
July 01, 2013 Jan 01, 2014 6 Months 7.25% to 8% 5898.8 6301.6 402.8 6.83%
Apr 02,2018 Aug 1 , 2018 4 Months 6 to 6.5% 10211.8 11346.2 1134.4 11.11%

Some Observations

  • Nifty has given positive returns in all the 4 rate hike cycles.

  • The longest rate hike cycle last for 4 years and surprisingly, during this period, Nifty has given an astounding return of 165.9% :astonished:

  • The shortest rate hike cycle was only for 4 months and it has delivered double digit positive returns as well.

Summary

  • In the past, Rate hike has actually not caused much damage to nifty and infact one of the biggest bull market happened during the longest rate hike cycle. :slight_smile:
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Source : Prashanth Krish

As you can see, There have been 37 instances where rates were hiked in the last 22 years.

Rate hike % No.of times
Between 0.05 – 0.2 3
0.25 22
Between 0.25 – 0.4 2
0.50 6
Above 0.5 4
Postive returns in 3 weeks 23 / 37 Times
Postive returns in 2 months 19 / 37 Times
Postive returns in 4 months 17 / 37 Times

As we can see from the above data of 22 years, its almost 50-50 % as to where the market is gonna be at after a rate hike for coming 4 months. which is the common probability factor for mrkts in general :slight_smile:

My Observation : Don’t panic

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Thanks for sharing your analysis!!!

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