A Study On The Relationship Between Interest Rate And Stock Market Volatility

Abstract

This study examines the relationship between interest rate fluctuations and stock market volatility in India, focusing on the impact of monetary policy on investor behavior and market performance. Interest rates, regulated by the Reserve Bank of India, influence borrowing costs, investment decisions, and stock prices. Higher interest rates tend to reduce investment and stock valuations, while lower rates encourage economic activity and market growth. The study uses both primary data collected through structured questionnaires and secondary data from sources such as the Reserve Bank of India, National Stock Exchange, and Bombay Stock Exchange.
Statistical tools including descriptive analysis, correlation, regression, and ANOVA are used to analyze the data. The findings reveal a significant relationship between interest rate changes and market volatility, indicating that fluctuations increase uncertainty and price movements. The study also highlights the role of investor perception in influencing stock market behavior and supports informed decision-making.