Interest Rate and Equity Returns relationship

Fed Rate/RBI Repo Rate and Equity Returns relationship

Say the FED in the US has fixed an interest rate of 3% then you can make about 10% average annually from the stock market. It has been seen that stock markets usually give a return of 6-7% more than interest rate. but this return is not in a straight line. else everybody will be rich. there are ups and downs but eventually after a long period you will notice that you have made 6-7% more returns than interest rates.

Similarly in India. if the RBI has fixed an interest Repo rate of 7%. then you will average out returns from the stock market at about 13-14%.