THE IMPACT OF CENTRAL BANK’S MONETARY POLICY ON THE INDIAN STOCK MARKET

Abstract

This study examines how the monetary policies of the Central Bank affect the Indian stock market, with a particular emphasis on the Nifty 50 index. The analysis investigates the relationship between important monetary policy tools, such as the repo rate and reverse repo rate, and stock market movements using econometric approaches, such as Granger causality tests. The study's conclusions underscore the significance of taking into account a variety of channels and time dynamics by revealing substantial but complex relationships between monetary policy actions and the Nifty 50 index. Although Granger causality is evident in some cases, relevant confounding variables should be taken into consideration when determining causal links. The study emphasizes the necessity of more research on the processes of transmission and the wider effects of monetary policy on financial markets. Keywords: Central Bank, monetary policy, Indian stock market, Nifty 50 index, Granger causality, repo rate, reverse repo rate.