IMPACT OF CENTRAL BANK POLICIES ON FINANCIAL MARKETS AND INSTITUTIONS PERFORMANCE

Abstract

Central bank policies play a significant role in maintaining macroeconomic stability by influencing financial markets, financial institutions, inflation, liquidity, investor confidence. this study examine how the central bank decisions impact financial markets and institutions from 2016 to 2026. It wants to know how the central bank actions, like changing interest rates and buying assets affect the stock market and the economy. The research investigates the relationship between monetary policy measures, including the key financial market indicators such as the BSE SENSEX, NIFTY 50 Index, GDP growth and repo rate, reverse repo rate, government bond yields, and central bank asset purchases. The study employs a quantitative research design using secondary data collected from the RBI, NSE, BSE and other official sources. It uses a kind of analysis to see how the central banks decisions relate to the financial markets. The results show that the banks decisions do have an effect on the stock market but it is not very strong. The analysis found that the banks decisions alone cannot explain what happens in the financial markets. The regression results reveal low explanatory power, with R² values ranging from 0.012 to 0.198 and statistically insignificant coefficients suggesting that policy rate changes alone are insufficient to explain movements in financial markets. The study helps us understand how the banks decisions affect the economy in India. It also shows that we need to think about more than the central banks decisions when we are trying to understand the economy.