Presentation of research report entitled "Impact of Interest Rate and Inflation on Stock Market: In Evidence with NEPSE Index" For further informations contact : nitesh.dubedi.9@gmail.com

1. IMPACT INTEREST RATE AND INFLATION
ON STOCK MARKET: IN EVIDENCE WITH
NEPSE INDEX
Presented By: Nitesh Kumar Dubedi

2. PURPOSE OF THE STUDY
 To access if there is any relationship between
interest rate and inflation with stock market.
 To examine the impact of interest rate and inflation
on stock market index.
 To identify if there is any differences in impact and
relationship of interest rate and inflation on stock
market during the period of conflict and after
conflict.

3. DATA PRESENTATION AND ANALYSIS
 Descriptive Statistics
Variables Minimum Maximum Mean Std. Deviation
Interest rate 0.02 12.66 4.20 3.11
Inflation rate 26.90 100.00 53.20 22.09
NEPSE index 163.40 1036.10 446.08 282.91

4. DATA PRESENTATION AND ANALYSIS
 Categorical Descriptive Statistics
Category Variables Minimum Maximum Mean Std. Deviation
Conflict
Period
Interest rate 1.47 12.66 4.70 3.07
Inflation rate 26.90 43.60 35.98 5.43
NEPSE index 163.40 360.70 239.24 69.62
Post Conflict
Period
Interest rate 0.02 8.52 3.71 3.24
Inflation rate 47.10 100 70.41 18.51
NEPSE index 362.90 1036.10 652.91 262.79

5. DATA PRESENTATION AND ANALYSIS
 Correlation Analysis
 *. Correlation is significant at the 0.05 level (1-tailed). **. Correlation is significant at the 0.01 level (1-tailed).
Variables Interest rate Inflation rate NEPSE index
Interest rate 1
Inflation rate
-.427*
(0.03)
1
NEPSE index
-0.298
(0.101)
.727**
(0.001)
1

6. DATA PRESENTATION AND ANALYSIS
 Categorical Correlation Analysis
 *. Correlation is significant at the 0.05 level (1-tailed).
Category Variables Interest rate Inflation rate NEPSE index
Conflict Period
Interest rate 1
Inflation rate
-.681*
(0.015)
1
NEPSE index -0.062
(0.433)
0.454
(0.094)
1
Post Conflict
Period
Interest rate 1
Inflation rate
-0.532
(0.057)
1
NEPSE index -0.37
(0.147)
0.309
(0.192)
1

7. DATA PRESENTATION AND ANALYSIS
 Independent Sample t-test
Variable Category Mean
Std.
Deviation
Std. Error
Mean
p-value
Mean
difference
Interest rate
Conflict
Period
4.70 3.07 0.97
(0.50) 0.98Post
Conflict
Period
3.71 3.24 1.02
Inflation
rate
Conflict
Period
35.98 5.43 1.72
(0.001) -34.43Post
Conflict
Period
70.41 18.51 5.85
NEPSE
index
Conflict
Period
239.24 69.62 22.02
(0.001) -413.67Post
Conflict
Period
652.91 262.79 83.10

8. DATA PRESENTATION AND ANALYSIS
 Regression Analysis
 *. Regression is significant at the 0.05 level (1-tailed). **. Regression is significant at the 0.01 level.
Model A Interest rate Inflation R2 F
1
559.863**
(0.001)
-27.067
(0.202)
0.089 1.75
2
-48.893
(0.686)
9.305**
(0.001)
0.528 20.136
3
-59.483
(0.737)
1.43
(0.933)
9.391**
(0.001)
0.528 9.517

9. DATA PRESENTATION AND ANALYSIS
 Categorical Regression Analysis
 *. Regression is significant at the 0.05 level (1-tailed). **. Regression is significant at the 0.01 level
Category Model A
Interest
rate
Inflation R2 F
Conflict
Period
1
245.79**
(0.001)
-1.40
(0.87)
0.00 0.03
2
29.64
(0.85)
5.83
(0.19)
0.21 2.08
3
-165.00
(0.50)
10.49
(0.31)
9.87
(0.11)
0.32 1.66
Post
Conflict
Period
1
764.25**
(0.001)
-29.99
(0.29)
0.14 1.27
2
343.63
(0.35)
4.39
(0.38)
0.10 0.85
3
581.92
(0.28)
-23.20
(0.51)
2.23
(0.71)
0.15 0.64

10. FINDING AND CONCLUSIONS
 Findings
It is found that Nepalese stock market has been
behaving as expected theoretically. It has shown
strong positive relationship with inflation and negative
response to interest rate.
 Correlation showed the following relationship with NEPSE
index
Variables Relationship Significance
Interest Rate Negative Significant
Inflation Positive Significant

11. FINDING AND CONCLUSIONS
 Findings continued…
 Categorical Correlation analysis showed following
relationship with NEPSE index
Interest Rate Inflation
Conflict Period
Post conflict
Period
Conflict Period
Post conflict
Period
Relationship Negative Negative Positive Positive
Significance Insignificant Insignificant Insignificant Insignificant

12. FINDING AND CONCLUSIONS
 Findings continued…
 Regression analysis showed the following impact of
variables on NEPSE index
Interest Rate Inflation
Impact Significance Impact Significance
Model 1 Negative Insignificant
Model 2 Positive Significant
Model 3 Positive Insignificant Positive Significant

13. FINDING AND CONCLUSIONS
 Findings continued…
 Categorical regression analysis showed the following
impact of variables on NEPSE index
Variables Interest Rate Inflation
Category Model Impact Significance Impact Significance
Conflict Period
Model 1 Negative Insignificant
Model 2 Positive Insignificant
Model 3 Positive Insignificant Positive Insignificant
Post Conflict
Period
Model 1 Negative Insignificant
Model 2 Positive Significant
Model 3 Negative Insignificant Positive Significant

14. ACTION AND IMPLICATIONS
 Nepalese stock market has been quite responsive to
macroeconomic variables like interest rate and
inflation, hence these variables are needed to be
analyzed before investing/buying stock.
 The stock market price movement can be predicted
in the long run by using macroeconomic variables.
 Investor can reduce microeconomic risk by
undertaking a strong portfolio diversification strategy.
 The stock market price movement can be predicted
in the long run by using macroeconomic variables.

15. IMPLICATIONS FOR FUTURE RESEARCH
 Include other macroeconomic variables that are not
incorporated into this study.
 Discuss the role of other micro economic factors and
institutional factors on stock price.
 Nepalese stock market is relatively very small
comparing with other emerging markets, it may not
be appropriate to generalize the results for all the
emerging markets. In future, similar studies can be
extended to incorporate other relatively bigger
emerging markets so that it can be generalized.