IMPACT OF INTEREST RATES ON MARKET PRICE OF STOCK IN NEPSE

Abstract

This research explores the influence of important macroeconomic indicators on the Nepal Stock Exchange (NEPSE) index. These variables include the interest rate, inflation rate, unemployment rate, and inflation rate. The study makes use of a quantitative methodology, along with descriptive research methodologies, to conduct an analysis of secondary data covering the years 2003–04 to 2022–23. The data was obtained from the Nepal Rastra Bank (NRB), Nepal stock exchange (NEPSE), and economic publications. Statistical investigations, which include correlation and multiple regression, have shown that there is a positive correlation between the predictors and the NEPSE Index that is relatively high (R = 0.679). Furthermore, these factors explain 46.2% of the variation in the data. While inflation, unemployment, and GDP growth rates do not display statistically significant correlations with the NEPSE index, the interest rate does indicate a substantial positive influence on the index. The results highlight the significant influence that variations in interest rates have on Nepal's stock market performance. These findings provide investors, policymakers, and market analysts with vital information. Future studies could further understand the dynamics of the NEPSE index by investigating other factors to provide a more thorough understanding.