The Impact of Rising Interest Rates on Equity Markets.

Stock Market Outlook in a High-Interest-Rate Environment

Financial markets are not limited to the equity and stock markets -- they also include the debt market, fixed income securities, money market, commodity market, foreign exchange market, and many more. Multiple factors influence the returns generated by all these markets. In India, due to a lack of awareness and limited financial inclusion, trading predominantly takes place in the equity markets, while other facets of the financial system remain largely unexplored. Only a small fraction of the population is aware of these other markets. To better understand the interconnected behaviour of each market, we need to examine the movement of interest rates and their impact on businesses, which directly affects stock prices.

To begin with, let us understand:

How Do Interest Rates Work?

Interest rates represent the cost of borrowing that the borrower pays to the lender. Businesses often borrow funds from banks