MACROECONOMIC FACTORS AND STOCK MARKET RETURN IN NEPAL

Abstract

The stock market is one of the most energetic sectors that play an important role in contributing to the wealth of the economy. It plays a crucial role in the economic growth and development of an economy which would benefit industries, trade and commerce as a whole. The aim of this study is to investigate the relationship and impact of macroeconomic variables on stock market returns in Nepal. Dependent variable of this study is stock market return measured by Nepal Stock Exchange (NEPSE) and independent variables are macroeconomic variables, such as Policy Interest Rate (IR), Inflation Rate (INF), Exchange Rate (ER) in US Dollar, Industry Production or Nepal Manufacturing Output (IP) and Broad Money Supply (MS). The study targets all the companies listed and active in Nepal Stock Exchange (NEPSE) from 2014 to 2023. For analysis, secondary data was collected from annual reports of Central bank of Nepal (NRB), Nepal Stock Exchange (NEPSE), Securities Board of Nepal (SEBON) and Ministry of Finance (MOF) and Economic Bulletins. The results of the study reveal that the stock market returns is influenced by macroeconomic variables in Nepal. Inflation Rate and Policy Interest rate have negative insignificant influence on stock market return in Nepal Stock Exchange while Exchange Rate in US Dollar and Broad Money Supply have positive significant influence on stock market return and also Industrial Production has positive insignificant influence on stock market return. The findings of the study may be useful to public and economy especially stock market investors to focus the macroeconomic variables for making their effective decisions in order to enhance their stock market returns.