Reviewed by Sep 30, 2020| Updated on
Boon refers to an event or situation that benefits investors for a brief period of time. It can also be a beneficial development for a short period of time.
A cut in the external benchmark rate by the Central bank provides a benefit of low-interest rates for a short duration. The cut in the external rate lowers the interest rates on personal and business loans, thus fuelling consumption. Once the consumer demand is back and inflation rises, the interest rate may be hiked to maintain the inflation rate. Hence, a brief period of boon of low-interest rate is available to consumers, especially during an economic slowdown.
Boons may arise from past developments, current or future developments. The term has its origins in Old Norse and Middle English and has been traditionally associated with the granting of favours or requests. In this sense, any action of the government such as low lending rates, one-time tax exemption or waiver of penalties would be a boon or "gift" for the common man or investor community.
Boon also includes the positive impact that could arise in certain business transactions such as mergers or demerger of businesses. The other examples of boon are the development of niche products or services, advancement in technology or in the field of medicines. The boom in software technologies led to an industrial revolution changing methods, systems, products and services. The technology led to the development of new products, integrating value chains and generating value for consumers.
In financial markets, a bonus issue of equity shares or one-time dividend from windfall gains are examples of a boon to investors. Likewise, interest rate and tax policies of the government have an impact on financial markets. An interest rate cut would be a boon for bondholders because bond prices rise on an interest rate cut. Similarly, a cut in the tax rates on gains from equity investments would be a boon for equity investors.