Monetary policy significantly influences the stock market by affecting interest rates, liquidity, and investor sentiment. Lower interest rates generally encourage investment and boost stock prices, while higher rates may deter investors and suppress market activity.

The study examines the impact of monetary policy on stock market performance in India. Monetary policy, regulated by the central bank, influences financial markets through tools such as the Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR), repo rate, and interest rates. These tools impact investor sentiment, corporate earnings, and overall market trends.

Using 20 years of secondary data (2004-2024), the study analyzes the relationship between key monetary policy tools and major stock indices like NSE (NIFTY), BSE (SENSEX), and BANKEX. The research employs statistical methods such as regression analysis and Granger causality tests to evaluate correlations and causations between monetary policy and stock market fluctuations.

Findings suggest that stock markets exhibit high volatility, and monetary policy tools like CRR and repo rates significantly impact stock indices, whereas interest rates show minimal influence. The study concludes that understanding monetary policies is crucial for investors and policymakers in managing stock market volatility. Future research should explore emerging financial tools and global macroeconomic factors for a more comprehensive analysis.