Interest Sensitive Stock

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Interest Sensitive Stock

A stock whose value is likely to increase or decrease substantially due to changes in interest rates. Most interest sensitive stocks represent publicly-traded companies with high rates of long-term debt. These companies' stocks decrease in value when interest rates rise because the higher cost of borrowing may result in lower profits and dividends. Conversely, their stocks rise on lower interest rates. For this reason, utility companies tend to have interest sensitive stocks.
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He continued: "The company's large exposure to Asia prospered from a combination of solid stock selection and a more favourable environment for financial and other interest-rate sensitive businesses.
That is evident in the sectors that are taking it on the chin -- especially heavily indebted industrial companies, and the interest-rate sensitive housing and automobile sectors.
US stocks dipped in a choppy session on Friday after the latest round of earnings reports, as a fall in the consumer discretionary sector and interest-rate sensitive stocks outweighed gains in healthcare names.
Whether or not interest rates will continue to rise remains uncertain--for clients who are concerned about interest rate risk, however, interest-rate sensitive product features provide one more option for customizing an annuity product to the individual client's needs, while also providing for future retirement income.
On the stock market, Neri said the decision could weigh on local equities and provide more room for correction as property shares and other interest-rate sensitive sectors could see a pullback.
"Commercial real estate finance is interest-rate sensitive and longer-term oriented," the Commercial Real Estate Finance Council wrote in a media statement.
The Bombay Stock Exchange's index of leading shares fell by as much as 2.88 percent to a day's low of 20,051.43 points, with interest-rate sensitive stocks in banking, auto and property hardest hit.
Giving this information in written reply to a question in the Lok Sabha, Shri Praful Patel, Minister of Heavy Industries & Public Enterprises, said that the decline in manufacturing growth has been on account of moderation in demand, both domestic and external, hardening of interest rates, slowdown in consumption expenditure, especially in interest-rate sensitive commodities, subdued business confidence and global economic uncertainty.
The extent to which a particular bank needs to curtail its lending to achieve a leverage tar get in the aftermath of an interest rate increase depends on the difference between the value of its short-term assets, which generate interest-rate sensitive income streams, and the value of its liabilities, which are similarly interest-rate dependent.
While interest rates are a key area of concern for life insurers at this time, a new report said interest-rate sensitive life insurance premiums constituted only 4.1 percent of total premiums of large insurers for 2012.
Among other interest-rate sensitive stocks, DLF slumped 7.2 per cent, while Unitech dropped 5.4 per cent.
Despite signs interest-rate sensitive parts of the economy are starting to respond to the interest rate cuts since late 2011, the RBA remains uncertain about the future resources investment and the ability for non-mining activity to strengthen sufficiently, to offset the effects of waning mining investment.