V3I3P68

A Study on the Impact of RBI Monetary Policy Announcement on Indian Stock Market (NIFTY 50)

Helan sivya R^1*, Dr. Nafesa Enayathulla²

Abstract

This study explores how monetary policy decisions made by the Reserve Bank of India (RBI) influence the performance of the Indian stock market, particularly the NIFTY 50 index. The research is based on secondary data collected from reliable sources such as RBI and NSE websites over selected years. It mainly focuses on understanding how changes in the repo rate affect market returns and investor behavior.

The findings indicate that the stock market reacts noticeably to policy announcements. When the RBI increases the repo rate, the market tends to show a negative or slow response due to higher borrowing costs. On the other hand, rate cuts generally create a positive market sentiment as they encourage investment and liquidity. It was also observed that market volatility increases during announcement periods, reflecting uncertainty and quick reactions from investors.

Additionally, the study shows that sectors like banking are more sensitive to interest rate changes, while sectors such as IT and pharmaceuticals are less affected in the short term. Overall, the study concludes that RBI policy decisions have a significant short-term impact on the stock market, although long-term trends depend on broader economic conditions.

Keywords:

RBI Monetary Policy, NIFTY 50, Repo Rate, Stock Market Returns, Market Volatility, Interest Rate Changes, Monetary Policy Announcements, Indian Stock Market, Correlation Analysis, Event Study Method