FED policy making committee will meet next week and may raise interest rates but it will be very small.
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There is too much anticipation the world over whether The Federal Reserve will increase rates or not. Interestingly 50% of the committee members wants an increase in rates, and 50% do not want a raise. Both the parties have some valid points to say.
Those who are against increase in rates say, let the American economy recover fully then increase rates, the other half that favors rate increase says the economy is getting stagnant due to not increasing rates for years and investors are investing money in more attractive and developing markets like India.
To give you an example if they just invest in any good debt fund in India they will get a return of almost 9% a year with ZERO risk. Compare this to 0% return there in America. If you had a lot of money where you would have invested? Of course India.
They are saying if FED increases rates at least some money will be invested in their economy and not go out to countries like India and China.
To some extend it may be true, but I personally feel comparing 1% to 9% is no comparison at all. Agreed they do not get all that 9%, there is some fees and brokerages involved, but still even if they are making 6% a year it is much more than 1% a year. So even if FED increases rates I do not think the investments in Indian markets by Foreign Institutional Investors (FII) will go down. It may go down by 5-10%, but this small dip will not have any effect on Indian markets at all.
So those who have done my course please do not panic. We are least bothered about direction of markets neither our capital is going to be eroded as our capital is heavily protected by hedge. Whenever there is a small 2% loss those who are trading naked will pay for our losses and we will escape a huge loss. Let those greedy aggressive traders lose money while we keep making money. 🙂
Please remember that FED policy making committee is meeting next week and may possibly increase rates as they are too much in pressure to raise rates. Since this is almost known to all markets in the world we are not seeing a huge correction in any stock market in the world. There is just a small dip because of traders who always love to trade in panic. I do not know why educated smart people trade naked and in panic and are willing to erode their wealth for no other reason but greed. These people will come and go, only those who follow the correct path to making money will keep making money. This is how any business works including the stock markets. I fail to understand why they do not understand this for years and by that time lakhs of rupees they have already lost.
Anyway till now due to fear of FED increasing rates, no market in the world has at least till now priced in a rate increase which is almost certain. Which means there is nothing to worry.
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