Interest Rates and Stocks

Why rates move the whole market.

Interest rates ripple through every stock. When rates rise, safe savings and bonds pay more, so investors demand more from stocks too, often pushing prices down. Rates also raise companies' borrowing costs, squeezing profits, especially for debt-heavy firms. Rising rates Higher borrowing costs, tougher competition from savings, often a headwind for stocks. Falling rates Cheaper borrowing, less competition from savings, often a tailwind. Banks are special Rate moves affect their lending spreads directly (see NIM). You can't control rates, but knowing their direction helps you understand why a good company's price might move for reasons that have nothing to do with the company itself.

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Valuation.