Analysis Of The Impact Of Monitory Policy On The Banking Sector Stocks Movement

Review of Literature:

1. Vasso P. Ioannidou (2003), This study examines whether Monetary Policy key rates alter the responsibilities of the central bank’s role in bank supervision. By using Monetary Policy indicators their will be affects of supervisory actions with two federal agencies.
2. Gabriel Jimenez, Steven Ongena (2003), To identify the effects of what does twenty three million banks in Nigeria of Monetary Policy which affects the credit risky in the firms.
3. Alex and Alberto Dalmazzo (2004), This paper develops a framework which is designed by monetary institutions to evaluate Monopolistic competition and economic performance.
4. John B. Taylor, Professor of Economies (2008), Monetary Policy: Balancing the growth and inflation risks it can be used as benchmark. The recent signs of Monetary Policy increased the inflation and worrisome in this regard.
5. Altunbas Yenes (2010), This study depicts the relationship between short term interest rates and bank risk by Monetary Policy. The result will be wide range of measures of risk as well as control in macroeconomics.
6. Sarat Dhal, Purnendu Kumar(2011), This study provides an empirical reflection of crucial issues like inflation, growth rates woth Monetary Policy linkages in India.
7. Farhan Ahmed, Aneeta Manwani (2013), By using Accounting ratios the study is made on comparision of Merger and Acquisition strategy for growth. In this study they used financial ratios were analysed by using eleven years of data.
8. Taiwo J N, Agwu, M. E, The study was made on investigations of credit risk management on the banks performance growth. By using credit risk management their will be impact on the growth of total loans and advances by Nigerian Deposit Money banks.
9. By Claudio Borio, Leonardo Gambacorta (2015), By using 109 large international banks data, to investigate the influence of Monetary Policy affects the banks profitability. The study suggests the interest rate structure on both the hands, the one hand on banks profitability and the other hand on return on assets. Usually their was a low interest rate and flat term structure banks profitability.
10. Hyun Song Shin (2016), The aim of post crisis monetary policy key rates has been find the bank equity matters for monetary policy banks performance. There will be found that the bank’s equity is an important determinant of both bank’s funds and lending growth. A bank can be both a lender and a borrower. Their will be cost advantage for the bank of the borrower.
11. Salina H. Kassim, M. Shabri Abd, This study analyses the impact of Monetary Policy shocks on the conventional and Islamic banks in a dual banking systems. Due the nature of Islamic ones which only involve in Interest instruments.

Jose-Luis Peydro and Jesus Saurina, To study the credit supply and Monetary Policy on identifying its banks balance sheet with its loans applications and advances.

Brugel (European Central Bank), The study on Capital regulation and Monetary Policy with fragile banks. To study the link between GDP and corporate probabilities of defaults in the euro area.

Ignazio Angeloni and Ester Faia (2018), A comparitive study of Monatary Policy rules under alternative Basel regimes. The framework has experiences a fragility in the recent crises by banks providing liquidity to both depositors.

Osakwe, A. C, (Department of Banking and Finance, 2019), This study was examined with the effect of Monetary Policy performance on the manufacturing sector in Nigeria. This study covered over a period of thirty two years. This study used variables such as Monetary Policy rates, Treasury bills rates, Cash reserve Requirements and money supply. Monetary Policy tools may run as a long term instrument.

Research Gap:

By studying the previous articles on Monetary Policy, it was found that most of the authors focused on

The Merger and Acquisition strategy for growth by Monetary Policy

The credit risk on corporate financial performance

There is excess liquidity present in economies by monetary policy

But, no one concentrated on how the banks performance growth is there, by using monetary policy key rates there is a impact on banks performance growth.

Research Questions:

Is there any relationship of monetary policy key rates with the select financial indicators?

Is there any impact of monetary policy key rates on select banks stock price?

Does the selected banks predict the future momentum based on Interest Rates?

Objectives of the Study:

To study the relationship of Monetary Policy key rates with the select financial indicators.

To measure the impact of Monetary Policy key rates on select banks stock price.

To predict the future momentum of select banks based on Interest Rates

The study of vector autoregression model has been applied to know the future movement of the select banks based on Interest Rates. The coefficient values indicates that the PNB rates is expected to go down in future by predicting the repo rates.

Findings Of The Study:

1. The study found the relationship of monitory policy key rates with the selected banking stock prices with the bivariate correlation. The study result indicated that the repo and Reverse repo are mostly having positive relation with the selected banks stocks but CRR and SLR are having the negative relation.
2. The study applied the Robust least square method and the result indicated that the monitory policy key rate are having the significant relation with the selected banking stocks in equity markets.
3. The study applied the Vector auto regression model and the result indicated that the based on the repo rate banking stocks are expected to go up in near future.

Suggestions Of The Study:

1. The study found that the monitory policy is having the significant impact on the stock prices. Hence the study suggests the investors to focus on the monitory policy at the time of the decision making.
2. The study suggested the investors to invest in the equity markets of the repo and reverse repo rates are at lower level.
3. The study advises the equity investors to focus on the banking index movement to know the recession and boom period life cycles, so that the equity markets movement can be identified.

Conclusion Of The Study:

The study focused on the monitory policy impact on the banking sector stocks movement based on the secondary data from the period of 2004 to 2018. The study applied the Bivariate correlation has been applied and the result found that the selected banking stocks are having the significant relation with the monitory policy rates. The Robust least square method has been applied and the result stated that the selected stock prices are having the significant impact with the monitory policy. The vector auto regression model has been applied and predicted that the banking stocks are expected to go up near future. Hence there is a need to do further research in this area by considering the economic factors effect on the banking stocks comparison with the monitory policy.