Words that send waves to the Indian stock market: investigating RBI's communication

The study draws attention to the Reserve Bank of India's communication as a policy tool and its impact on market participants. It fi rst aims to quantify the qualitative variable-communication by employing textual analysis methods. The investigation starts by extracting the tone of monetary policy statements and trace its transmission on market sentiment in the presence of various informational, macroeconomic, and fi nancial controls. The work concludes that market participants draw inferences from the tone of the RBI's monetary policy statement and update their information set about the present state and prospects.