Effect of Economic Development on Nepalese Stock Market

Abstract

The money market is directly driven by changes in interest rates and inflation from the capital market. Stocks are sensitive to changes in interest rates and inflation because they have a negative correlation with stock prices, while GDP has a positive correlation with the stock exchange. Determining the trends in the GDP, interest rates, inflation rates, and NEPSE index as well as looking at the relationships between these variables are the specific objectives of the study. Examining the separate and combined effects of interest rates and inflation rates on the NEPSE index is the main objective of the study. In order to address the several issues brought up in the study, causal research methodologies have been used in this analysis. Numerous fact-finding investigations and analytical methods are used in this study. Presenting the situation as it is at the moment is the primary goal of descriptive research. This is done in an effort to pinpoint and define the traits of the relevant variables. The research findings indicate that there is a considerable negative correlation between the interest rate and the inflation rate and the NEPSE index. On the other hand, one of the other components, GDP, shows a positive association with the NEPSE index. The NEPSE index will grow in the case of a dip in lending interest rates and decrease in the case of an increase, per the negative relation. According to the positive influence, the NEPESE index will rise in tandem with an increase in the inflation rate.