Impact of Bank Interest Rate on Stock Market Index: Evidence from Nepal Stock Exchange (NEPSE)

Abstract

The major conclusion of this study is that deposit rate, lending rate, base rate has significant impact on Stock index (NEPSE Index). NEPSE index has Negative correlation (Pearson Correlation) other variable like Deposit interest rate, Weighted Average lending interest rate, Base rate, except interbank rate. There are four independent variables to define relationship between interest rate and stock index in the short run. It has been concluded that 92.3% variation of stock market is determined by Interest rate variables i.e., by Weighted Average Deposit interest rate, Weighted Average lending interest rate, Base rate, interbank rate. Lending interest rate and base rate are highly positively associated with and interbank rate is moderately associated. The status of the market fluctuated in various ways over the years and in order to analyze it and provide a alarming proof about the causes and affects of it, we need to go through all the data and logs found in different sources and also some self-study. To arrive at the conclusion Dependent variable is NEPSE index and independent variable are Weighted average deposit rate, Weighted average lending rate, Average Base rate and Interbank rate.