A Study of Repo Rate’s Impact on The Indian Stock Market

Abstract

The repo rate is a considerable manipulation for the economic growth and stability done by the central banks i.e. Reserve Bank of India. It is of authority on the nation’s stock market also as it influences the interest rates of lending and borrowing for the companies influencing capital expenditure and investor sentiment directly. This paper analyses the relationship between the repo rate set by the Reserve Bank of India and the Indian stock market, specifically, the index - Nifty 50. The objective of the paper is to investigate the impact of the repo rate on the Indian stock market. The analysis has been conducted on the basis of correlation and covariance on the closing prices for each month of the Nifty 50 over a time period of 10 years published by the National Stock Exchange and repo rates published by the Reserve Bank of India over the same time period.