Impact of Monetary Policy on Pakistan Stock Exchange 100Index Return

Abstract

Investment return is always important for investors. Investment return plays a vital role in the life of any business. There are many factors, which have a significant influence on the Stock market such as interest rate, foreign exchange rate, cash reserve ratio, inflation, money supply and many more. These factors affect the overall market efficiency. Therefore, the overall purpose of this study is to identify the impact of monetary policy and macroeconomic variables on the stock exchange. Most of this research consisted of quantitative analysis of data. Secondary data was used in this research. The secondary data have been taken from the StateBank (SBP) official website, Business Recorder, Trading Economics and Pakistan Stock Exchange official websites. The data of variables (discount rate, cash reserve requirement CRR, exchange rate,) have been taken from State Bank of Pakistan SBP official websites. The data on the KSE 100 index return, inflation and Money Supply have been taken from Business recorders, trading economics and SBP websites. To identify the impact of different variables on stock exchange the data were analyzed through software like SPPS. Through SPSS regression and correlation tests were applied to the data. The overall methodology supported the hypothesis. The discount rate showed a negative impact on KSE 100 index. It is recommended that every investor should be cautious before making an investment and should deeply and carefully analyze the factors that have a significant influence on stock returns.