IMPACT OF INTEREST RATE ON STOCK MARKET IN NEPAL
Date
2024
Authors
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Journal ISSN
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Publisher
Shanker Dev Campus
Abstract
This research explores the relationship between interest rates and stock market performance in
Nepal, focusing on the period from mid-July 2012 to mid-July 2022. The Nepalese stock
market, represented by the Nepal Stock Exchange (NEPSE), has evolved significantly since
its inception, serving as a critical platform for capital mobilization and economic growth.
Interest rates, including deposit rates, lending rates, bank rates, and Treasury bills rates, are
examined as potential factors influencing stock market behaviour.
The study employs quantitative methods to analyse annual data, investigating how changes in
interest rates affect the NEPSE index, which serves as a barometer of market sentiment and
economic health in Nepal. Through regression analysis and hypothesis testing, the study
evaluates the impact of these interest rates on stock market returns, providing insights that are
crucial for investors, policymakers, and stakeholders in understanding market dynamics.
Key findings highlight the significant influence of deposit and lending rates on stock prices,
underscoring their role in shaping investor behaviour and market performance. Conversely,
Treasury bills rates exhibit a lesser impact, suggesting nuanced interactions between different
interest rate mechanisms and stock market movements. The study contributes valuable insights
into the Nepalese financial market landscape, offering implications for investment strategies,
policy formulations, and future research directions.
This research is instrumental for stakeholders seeking to navigate and leverage the interplay
between interest rates and stock market dynamics in Nepal, ultimately fostering informed
decision-making and market efficiency.