NLP-Based Application for Analyzing Private and Public Banks Stocks Reaction to News Events in the Indian Stock Exchange

Abstract

This is an effort to analyze the reaction of stock prices of Indian public and private banks listed in NSE and BSE to the announcement of seven best case news events. Several recent studies have analyzed the correlation between stock prices and news announcements; however, there is no evidence on how private and public sector Indian bank stocks react to important news events independently. We examine these features by concentrating on a sample of banking and government news events. We classify these news events to create a group of negative and a group of positive tone of announcements (sentiments). The statistical results show that the negative banking news announcements had a one-month impact on private banks, with statistically significant negative mean CARs. However, with highly statistically substantial negative mean CARs, the influence of the negative banking news announcements on public banks was observed for two months after the news was published. Furthermore, the influence of the positive banking news on private banks persisted a month after the news was published. Positive banking news events had an influence on public banks for five days after they were published. The study concludes that public bank stocks react more to negative news announcements than positive news announcements in the same manner as the sentimental polarity of the news announcements as compared to private bank stocks. First, we retrieved the news articles published in prominent online financial news portals between 2017 and 2020, and the seven major news events were extracted and classified using multi-class text classification. The Random Forest classifier produced a significant accuracy of 94% with pre-trained embeddings of DistilBERT, a neural network model, which outperformed the traditional feature representation technique, TF-IDF. The training data for the classifier were balanced using the SMOTE sampling technique.