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Market's reaction to change in Monetary Policy
Feb 3, 2016

Stock markets tend to react to every bit of information either on the micro or the macro front. And most of the time, such swings hardly make sense. One such economic event, which influences market movements is the announcement of Monetary Policy.

As seen in today's chart, when the RBI announced a rate cut, the Sensex gained. But when the RBI maintained status quo, the Sensex did not always react positively.

But as a serious long term investor, such market movements should not bother you. As we have discussed many times in the past, such policy decisions should not impact the way you go about investing.

Investors should bear in mind; monetary policy is nothing more than a liquidity management tool for the central bank. And should be perceived as a signal of the broader macro trends. When it comes to investing in stocks, the focus has to be on the soundness of the business model, management quality and reasonable valuations.

Data Source:Business Standard

This Chart Of The Day was published in The 5 Minute WrapUp - Why Are Stock Markets Worried about Low Oil Prices?

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